International community agrees on a road map for resolving the tax challenges arising from digitalisation of the economy

International community agrees on a road map for resolving the tax challenges arising from digitalisation of the economy

This is a Statement issued by the OECD


The international community has agreed on a roadmap for resolving the tax challenges arising from the digitalisation of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020, the OECD announced today.

The 129 members of the  OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinational enterprises.

The document, which calls for intensifying international  discussions around two main pillars, was approved during the May 28-29 plenary meeting of the Inclusive Framework, which brought together 289 delegates from 99 member countries and jurisdictions and 10 observer Organisations. It will be presented by OECD Secretary-General Angel Gurría to G20 Finance Ministers for endorsement during their 8-9 June ministerial meeting in Fukuoka, Japan.

Drawing on analysis from a January 2019 Policy Note and informed by a public consultation held in March 2019, the Programme of Work will explore the technical issues to be resolved through the two main pillars. The first pillar will explore potential solutions for determining where tax should be paid and on what basis (“nexus”), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (“profit allocation”).  

The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax. This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and  is intended to address remaining issues identified by the OECD/G20 BEPS initiative.

In 2015 the OECD estimated revenue losses from BEPS of up to USD 240 billion, equivalent to 10% of global corporate tax revenues, and created the Inclusive Forum to coordinate international measures to fight BEPS and improve the international tax rules.

“Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy,” Mr Gurría said. “Today’s broad agreement on the technical roadmap must be followed by strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it.” 

The Inclusive Framework agreed that the technical work must be complemented by an impact assessment of how the proposals will affect government revenue, growth and investment. While countries have organised a series of working groups to address the technical issues, they also recognise that political agreement on a comprehensive and unified solution should be reached as soon as possible, ideally before year-end, to ensure adequate time for completion of the work during 2020.

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Buzz off and go tax some land and wage slaves. Soon we won't even be using your ridiculous fiat currencies.

Oh we laughed.

I may just have spotted the essential Flaw in this 'ere proposal:

Today’s broad agreement on the technical roadmap must be followed by strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it.

(my bolding)

So just as soon as a Hated Multi National (HMN) gets wind of the specific proposals for implementation in a given Piddling Sovereign Nation (PSN), a fly on the wall or a 5 eyes/Chicom/Russian bug might overhear something like the following:

HMN: We hear, through the grapevine, that y'all are proposing a tax on our alleged Profits in yer tiny jurisdiction.
PSN: Why yes, that's right, you're welcome to make submissions, as is your Democratic Right, but we do remind you that this is an International Movement, backed with all the might and power of the UN. So the only real question is what tax rate, on what measure, applied from when.
HMN: Are you aware that we employ 15,000 workers in your PSN?
PSN: Well, OK, but what's that got to do with anything?
HMN: We can close down operations on your PSN and without redundancy (read their Contracts), just before your next Election Year. We reckon that, on the old, old principle of one disgruntled worker telling ten acquaintances, that translates to 150K less Votes for you. Capiche?
PSN: Oh but that's a political issue, not a taxation one.
HMN: So you say. But answer us this: who is gonna get the blame - the Callous Company, for pulling out of an operation that, mirable dictu, seems with the stroke of an accounting entry to be Unprofitable, or the Clueless Gubmint Circus, who did not pull out all the stops to Keep us, and all of that Employment, Here?
PSN: Um, lemme take that Upstairs.......
HMN: Sure, but that Election is on a fixed schedule.......so Hurry...