OECD’s Gurria Calls For Collective Action On Digital Taxation

OECD Secretary-General Angel Gurria has called for a collective effort on the design of temporary, short-term measures to tackle the international tax challenges of the digital economy.

Speaking at the Group of Twenty (G-20) Finance Ministers and Central Bank Governors meeting held in Washington on October 13, Gurria said: “There is now a very high public pressure on governments to act and calls to move quickly to ensure that there is fair taxation of digitalized businesses. Thus, the risk of unilateral measures is increasing, and with it, the potential for negative spill-over impacts. Unilateral measures would undermine the collective efforts undertaken, as well as the results achieved so far, collectively, in the G-20. To make progress, we must continue to work together, to move collectively.”

Gurria added: “To do so, we must address the core issue: what does it mean to create value in a world where a business may have a significant commercial presence and a large digital footprint, but minimal or no physical presence in a jurisdiction? To answer this, we must closely consider the new business models and value-chains which digitalization creates. We must identify the principles, applying to both traditional and digital businesses, which we would use to design the new international tax framework if we were starting from scratch.”

Gurria said that countries “must put forward a long-term, sustainable solution that does not discriminate against or seek to ring-fence the digital economy,” adding that “digitalization is indeed quickly creeping into almost all business models. Thus, we are not talking about how to tax digital companies, but rather to tax a digitalized economy.”

“The BEPS project has been a success because we worked together. We need to maintain this momentum for international tax cooperation, and call on you to affirm your support for this roadmap towards a consensus-based approach to the taxation of a digitalized economy,” he said.

Gurria said that in April 2018 the OECD will deliver a report containing concrete proposals on the issue, and a meeting with stakeholders will be held in November to prepare the draft of the report.

Gurria’s remarks follow the European Commission’s launch of a new agenda on September 21, which seeks to ensure that the digital economy is taxed “in a fair and growth-friendly way.” This could lead to the announcement of new tax rules by the spring of 2018 – potentially a tax on turnover rather the profit, an online advertising levy, or a withholding tax on payments to digital businesses.