OECD takes next steps in reaching global consensus on digital taxation

In February the Organisation for Economic Co-Operation and Development (OECD) proposed three different approaches aimed at reaching a global consensus on how taxing rights on income generated from cross-border activities in the digital age should be allocated among countries. The proposals were made subject to a public consultation procedure and – building on the input received – OECD has now moved forward to secure a “Unified Approach” under Pillar One and set the details of the “Global Anti-Base Erosion” issues under Pillar Two.

In May 2019, the OECD agreed a Programme of Work for Addressing the Tax Challenges of the Digitalisation of the Economy. This Programme is divided into two pillars:

  • Pillar One (“Unified Approach”) addressing the allocation of taxing rights between jurisdictions and considering various proposals for new profit allocation and nexus rules.
  • Pillar Two (“Global Anti-Base Erosion” or “GloBE”) focusing on the remaining base erosion and profit shifting issues and seeking to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation.

“Unified Approach”

The Proposal for a “Unified Approach” under Pillar One is focused on the “consumer-facing businesses” and would cover highly digitalised business models and other highly profitable business models that interact with consumers. It would provide a “package” for reallocation of taxing rights to market jurisdictions in certain circumstances in exchange for improved tax certainty. In particular, it would ensure that a company is taxable in a jurisdiction where its sales exceed a certain threshold even if it is not physically present in that market by establishing a formula to reallocate a portion of deemed residual profits to market jurisdiction.

OECD carried out a public consultation on this proposal in October this year. In its submission, EL supported the general principle that online companies should be prevented from making profits in a jurisdiction without paying any tax to that jurisdiction but called for further clarifications of concepts such as “consumer-facing businesses” and “sustained and significant involvement” in a jurisdiction.

Global Anti-Base Erosion

This Proposal under Pillar Two focuses on specific technical issues, in particular the use of financial accounts as a starting point for determining the tax base; the extent to which a multinational enterprise can combine income and taxes from different sources in determining the effective (blended) tax rate on such income; and stakeholders’ experiences with carve-outs and thresholds that may be considered as part of this proposal.

The Global Anti-Base Erosion proposal was also subject to a public consultation procedure in November.

Next steps

The OECD aims to have a more detailed, consensus-based solution under Pillar One, as well as key parameters for Pillar Two ready for political agreement by the first half of 2020. The overall global consensus solution is then expected to be agreed by the end of 2020.

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Synopsis

Français

L’OCDE entreprend les prochaines étapes pour parvenir à un consensus mondial sur l’imposition numérique

En février cette année, l’OCDE a proposé trois approches différentes visant à atteindre un consensus mondial sur la manière dont les droits de taxation sur les revenus générés par des activités transfrontalières à l’ère numérique devraient être répartis entre les pays. Les propositions ont été soumises à une procédure de consultation publique et, sur la base des contributions reçues, l’OCDE a avancé pour garantir une « Approche unifiée » en vertu du Pilier un et définir les détails des problèmes de « Lutte globale contre l’érosion de la base » sous le Pilier deux.

Dans ses soumissions à l’OCDE à ce sujet, EL a soutenu le principe général que les sociétés en ligne ne devraient pas faire de bénéfices dans une juridiction sans payer de taxe dans cette juridiction et a appelé à obtenir des clarifications supplémentaires sur certains concepts utilisés dans les propositions. La solution de consensus globale dans son ensemble devrait être convenue d’ici la fin 2020.

Español

La OCDE toma las siguientes medidas para alcanzar el consenso mundial sobre la fiscalidad digital

En febrero de este año, la OCDE propuso tres enfoques diferentes destinados a alcanzar un consenso mundial sobre cómo los derechos fiscales sobre los ingresos generados por las actividades transfronterizas en la edad digital deberían asignarse entre países. Las propuestas se hicieron siguiendo un procedimiento de consulta pública y, con base en la aportación recibida, la OCDE ha procedido para garantizar un «enfoque unificado» en el Primer Pilar y establecer los detalles de los problemas de la «erosión mundial contra la base» en el Segundo Pilar.

En sus presentaciones a la OCDE acerca de esta materia, EL respaldó el principio general de que a las empresas digitales se les debería impedir obtener beneficios en una jurisdicción sin pagar ningún impuesto a dicha jurisdicción, así como se les debería reclamar aclaraciones adicionales sobre ciertos conceptos mencionados en las propuestas. Se espera que la solución generalizada de consenso mundial quede acordada a finales de 2020.

Deutsch

OECD leitet nächste Schritte auf dem Weg zu einem globalen Konsens über Digitalsteuer ein

Im Februar dieses Jahres schlug die OECD drei verschiedene Ansätze vor, um einen globalen Konsens darüber zu erreichen, wie Besteuerungsrechte auf Einnahmen aus grenzüberschreitenden Aktivitäten im digitalen Zeitalter am besten unter Ländern verteilt werden können. Die Vorschläge wurden einem öffentlichen Konsultationsverfahren unterzogen. Danach hat die OECD – auf der Grundlage der eingegangenen Beiträge – einen „einheitlichen Ansatz“ im Rahmen der ersten Säule sichergestellt und die Details der Themen der „Global Anti-Base-Erosion“ (Regelwerk zur Mindestbesteuerung) im Rahmen der zweiten Säule festgelegt.

Die EL hat dazu eigene Vorschläge bei der OECD eingereicht, in denen sie den allgemeinen Grundsatz unterstreicht, dass Online-Unternehmen daran gehindert werden sollten, in einem Hoheitsgebiet Gewinne zu erzielen, wenn sie in diesem Hoheitsgebiet keine Steuern zahlen, zugleich aber auch zu einer weiteren Klärung bestimmter Konzepte aufgerufen, die den Vorschlägen zugrundeliegen. Eine globale Konsenslösung wird aller Erwartung nach bis Ende 2020 vorliegen.

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