EL takes part in the OECD consultation on tax challenges of digitalisation

The increasing digitalisation of the economies across the globe prompted a major challenge for international taxation. Notably, how should taxing rights on income generated from cross-border activities in the digital age be allocated among countries? To address this issue, the OECD (Organisation for Economic Co-operation and Development) launched a public consultation in February this year in which it set out three proposals on how to address this issue and invited the public to comment on a number of policy issues and technical aspects of these proposals. Findings based on the comments received will feed into the further work of the OECD towards a consensus-based long-term solution in 2020. EL took part in this consultation highlighting major taxation-related issues in the gambling sector.

Possible solutions to the tax challenges of digitalisation

In March 2018, the European Commission proposed new rules to ensure that digital business activities are taxed in a fair way in the EU. Given the facts that: (1) some EU Member States have fundamentally different views of this matter; and (2) that tax measure must be adopted unanimously by all Member States; it seems that an agreement at the EU level might be difficult to achieve any time soon. This is why many eyes turn to the OECD now.

The OECD is an intergovernmental economic organisation and its mission is to promote policies that will improve the economic and social well-being. It does so mainly by providing a forum in which governments from around the world can work together to share experiences and seek solutions to common problems.

In response to the challenges posed by digitalisation, the OECD is currently examining three proposals:

  • The ‘user participation’ proposal

Focuses on the participation of users as a critical component of value creation for certain highly digitalised businesses and would only apply to digitalised business models (e.g. social media platforms, search engines, etc.).

  • The ‘marketing intangibles’ proposal

Would apply to a wider range of businesses that have marketing intangibles to include e.g. trademarks or customer lists and data.

  • The ‘significant economic presence’ proposal

Would create a taxable presence in a jurisdiction based on a significant economic presence of a non-resident taxpayer through purposeful and sustained customer interaction via digital technology or other automated means.

In the public consultation in launched in February this year, the OECD invited public to comment on a number of policy issues and technical aspects of these proposals. Findings based on the comments received will feed into the further work of OECD towards a consensus-based long-term solution in 2020.

EL submission

EL welcomes the initiative seeking solutions at an international level.

In its submission EL supported an approach which would foster tax justice through an answer as broad and efficient as possible.

In the gambling sector, taxation is a crucial regulatory instrument that contributes to consumer protection, public order and anti-fraud goals. Conversely, EL highlighted the ‘significant economic presence’ proposal to have the potential to address a larger number of situations, including those digital activities that have a ‘brick and mortar’ equivalent – such as lotteries and gambling – and e-commerce in general. With a view of the activities of its members, changes in the tax rules according to the ‘user participation’ or the ‘marketing intangibles’ proposals are more likely to have a comparatively lesser impact on all online activities. This is particularly relevant given the fact that gambling sector is regulated at national level.

Finally, a reference to tax evasion issues which are of public concern has also been made.

***

OECD Tax Challenges Arising from Digitalisation – Interim Report 2018 is available here.

All the public comments received on the possible solutions to the tax challenges of digitalisation are available here.

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Synopsis

Français

La numérisation croissante des économies à travers le monde a engendré un défi majeur pour la fiscalité internationale. Notamment, comment répartir entre les pays les droits d’imposition sur les revenus générés par les activités transfrontalières à l’ère numérique ? Afin de résoudre ce problème, l’OCDE (Organisation de coopération et de développement économiques) a lancé une consultation publique en février dernier, dans laquelle elle énonçait trois propositions sur la manière de traiter cette question et invitait le public à commenter un certain nombre de questions sur la politique générale et les aspects techniques de ces propositions. Les conclusions tirées des commentaires reçus alimenteront les travaux ultérieurs de l’OCDE en vue d’une solution consensuelle à long terme en 2020. EL a participé à cette consultation soulignant les principaux problèmes liés à la fiscalité dans le secteur des jeux de hasard.

Español

La digitalización cada vez mayor de las economías de todo el mundo ha supuesto un gran desafío para los impuestos internacionales. Especialmente, ¿cómo se deberían asignar entre los países los derechos fiscales sobre los ingresos generados mediante actividades transfronterizas en la era digital? Para abordar este problema, la OCDE (Organización para la Cooperación y el Desarrollo Económicos) presentó una consulta pública en febrero de este año en la que se describen tres propuestas sobre cómo abordar este problema e invitó al público a dar su opinión sobre diferentes cuestiones normativas y aspectos técnicos de dichas propuestas. Los hallazgos que se obtengan como resultado de los comentarios recibidos se utilizarán en trabajos posteriores de la OCDE con el objetivo de conseguir una solución a largo plazo acordada para 2020. EL participó en esta consulta destacando los mayores problemas fiscales en el sector de las apuestas.

Deutsch

Die zunehmende Digitalisierung der Volkswirtschaften weltweit hat zu einer enormen Herausforderung für die internationale Besteuerung geführt. So stellt sich insbesondere die Frage, wie Besteuerungsansprüche auf Einkommen aus grenzüberschreitenden Aktivitäten im digitalen Zeitalter unter den Ländern aufzuteilen sind. Um auf diese Fragestellung einzugehen, hat die OECD (Organisation für wirtschaftliche Zusammenarbeit und Entwicklung, OWZE) im Februar dieses Jahres eine öffentliche Anhörung eingeführt, in der drei Vorschläge dargelegt werden, wie mit diesem Problembereich umzugehen ist, und die Öffentlichkeit aufgefordert wurde, zu einer Reihe von Richtlinienfragen und technischen Aspekten dieser Vorschläge Stellung zu nehmen. Die auf der Grundlage der Kommentare eingegangenen Ergebnisse werden in weitere Arbeiten der OECD hin zu einer konsensbasierten langfristigen Lösung im Jahr 2020 einfließen. EL hat an dieser Anhörung teilgenommen und größere steuerbezogene Problemstellungen im Glücksspielsektor hervorgehoben.

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