The Digital Economy poses particular difficulties for individual tax jurisdictions not least because digital businesses often do not have a physical presence in countries where they transact considerable amounts of their business.
When the OECD was carrying out its Base Erosion Profit Shifting (BEPS) work its first Action was a review of the digital economy and the threats that it posed to tax systems. An early conclusion of the OECD work was that the digital economy did not merit a separate set of tax rules but it presented a major threat to the proper functioning and sustainability of tax regimes.
An OECD report was published on the Digital Economy in October 2015, at the end of the main two year period of work by OECD, but the OECD Digital Economy Task Force was kept in place and it is now due to publish a further interim report by April next year in time for the meeting of the G20 Finance Ministers.
OECD has just issued a “Request for Input” to be submitted by 13 October 2017 in advance of a public consultation meeting in California on 1 November 2017.
OECD has also published an Outline of the Interim Report for the G20 Finance Ministers’ meeting.
The European Commission has also been active in this area and at the same time as the OECD “Request for Input” it published a draft Communication on a Fair and Efficient Tax System in the EU for the Digital Single Market.
The Commission paper set out a number of new ways of doing, digital, business:
Picking up on suggestions in the October 2015 OECD report the Commission paper considers whether any of the taxation models put forward in that paper could offer a short term solution to the problem of taxing the digital economy in a fair and efficient manner. These suggestions are: