The OECD Inclusive Framework on BEPS (‘IF’, a group of 113 countries) issued its paper Tax Challenges Arising from Digitalisation – Interim Report 2018 (the ‘Report’) on 16 March, and held a public webcast to discuss its findings. This was followed by the European Commission’s (EC’s) recommendations for EU-wide adoption on similar topics, which were published on 21 March. A number of countries around the world, including within the EU, have also proposed or adopted unilateral measures in recent months.
While some countries in both the IF and EU are keen to move quickly toward a new international allocation of corporate taxation rights that takes certain digital factors (such as contributions from users) into account, there are also countries within each that do not believe that this is necessary. The EC and the OECD recommend very different solutions to this divergence – where the OECD has proposed a two year, detailed review of the issues, aiming to bring countries together, the EC has recommended that EU countries assert the right to tax the (direct and indirect) profits generated from provision of digital services to users in the EU, and levy turnover taxes until treaty partners agree to recognise this right.
The potential implications for businesses, governments and tax administrations will depend on the extent to which countries proceed with unilateral action, at least until other measures are agreed. There is a significant risk of double or multiple taxation in these situations and the number of cross-border disputes may rise, while the economic incidence of a turnover-levy most likely would be on consumers.
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Bildquelle: Henning Hraban Ramm / pixelio.de