The OECD published for stakeholders’ comments a proposal to advance international negotiations to ensure that multinational enterprises (MNEs), including digital companies, pay tax wherever they have significant consumer-facing activities and where they generate profits.
The proposal – Secretariat Proposal for a Unified Approach – would re-allocate some profits and corresponding taxing rights to countries and jurisdictions where MNEs have their markets.
It would ensure that MNEs conducting significant business in places where they do not have a physical presence, be taxed in such jurisdictions, through the creation of new rules stating: where tax should be paid (“nexus” rules); and on what portion of profits they should be taxed (“profit allocation” rules).
The proposal was discussed by the Task Force on the Digital Economy at its meeting on October 1, 2019.
OECD Secretary-General Angel Gurría said: “We’re making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020.”
“This plan brings together common elements of existing competing proposals, involving over 130 countries, with input from governments, business, civil society, academia, and the general public. It brings us closer to our ultimate goal: ensuring all MNEs pay their fair share.”
“Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy. We must not allow that to happen,” Gurría added.
Pascal Saint-Amans, Director, OECD Centre for Tax Policy and Administration, said: “Developing countries make up the most of the Inclusive Framework. The rules must be as simple as possible to be administered by all countries, starting by those that do not have enough resources to implement.”
Commenting on the development, Business Europe, tweeted: “We welcome the progress taking place at the OECD to address Digital Tax. Only a global solution can ensure both a fair and effective tax framework for digital companies.”
Comments must be received by November 12, 2019. A public consultation meeting will be held onNovember 21-22, 2019, at the OECD Conference Centre in Paris.