OECD Seeks to Harmonise Indirect Taxation Of Trade In Cross Border Services

by Ulrika Lomas, Tax-News.com, Brussels

20 July 2004

The OECD has launched a project designed to lead to an agreement on more effective indirect taxation of cross border trade in services and intangible goods.

The Paris-based Organisation for Economic Cooperation and Development believes that action has become necessary on this issue in light of the rapid growth of trade in intangibles, such as television rights, cross-border mobile telecommunications, advertising, leasing and management services, leaving many firms to face a “complex web” of tax rules.

The OECD noted that consequently, companies in some industries are effectively taxed twice, while others do not pay any consumption or value added taxes.

“There needs to be a balance struck between certainty and clarity for business and an environment in which business can grow, and an assurance for governments that the tax base is not eroded,” commented OECD Fiscal Affairs Committee Chair Bill McCloskey.

The project is to be carried out under the auspices of the OECD’s Committee on Fiscal Affairs, involving tax experts from 30 member and four Observer status countries.

“An inclusive process for taking the project forward is essential, not only for business, but also for those countries around the world that operate valued added taxes and which are not members of the OECD,” Mr. McCloskey added.

One of the first tasks of the Committee will be the agreement of a set of international principles on the indirect taxation of cross-border services.

Preliminary results of the project are expected to be published in the first half of 2005.

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