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Countries Agree To Push For Global 'Digital Tax' Solution By 2020

by Ulrika Lomas,, Brussels

16 March 2018

More than 110 countries and jurisdictions have agreed to review two key concepts of the international tax system, as part of the OECD's response to a mandate from the G20 Finance Ministers to work on the implications of digitalization for taxation.

The members of the OECD/G20 Inclusive Framework on BEPS will work towards a consensus-based solution by 2020. This was agreed in the Inclusive Framework's Interim Report on the Tax Challenges Arising from Digitalisation, released March 16, 2018, which is to be discussed by the G20 at its two-day meeting starting March 19, 2018.

Building on the 2015 BEPS Action 1 Report, the Interim Report includes an in-depth analysis of the changes to business models and value creation arising from digitalization, and identifies characteristics that are frequently observed in certain highly digitalized business models.

Describing the potential implications for the international tax rules, the Interim Report identifies the positions that different countries hold on possible solutions. These approaches range from those countries that consider no action is needed, to those that consider there is a need for action that would take into account user contributions, through to others who consider that any changes should apply to the economy more broadly.

The Interim Report also looks at how digitalization is affecting other areas of the tax system, including the opportunities that new technologies offer for enhancing taxpayer services and improving compliance, as well as the tax risks, including those relating to the blockchain technology that underpins crypto-currencies.

"The international community has taken an important step today towards resolving the tax challenges posed by the digitalization of the economy," said Angel Gurria, the OECD's Secretary General. "We have underlined the complexity of the issues, and highlighted the importance of reaching international agreement, both for our economies and the future of the rules-based system. The OECD stands ready to accompany countries as they seek to build a common understanding of the issues related to the digitalization of the economy and taxation, as well as the long-term solutions."

TAGS: compliance | Finance | tax | business | value added tax (VAT) | corporation tax | transfer pricing | G20 | tax reform | services | Tax | BEPS

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