The OECD has published comments received on its discussion paper on the tax challenges presented by the digital economy. The respondents included Deloitte, the CIOT, the International Bar Association and the BEPS Monitoring Group, which includes representatives of Christian Aid and the Tax Justice Network. An OECD task force on the digital economy will discuss the responses early next month. On 23 January, a live webcast presentation by the OECD’s Centre for Tax Policy and Administration will include an overview of the BEPS project and an ‘update on 2014 deliverables’; the involvement of developing countries; and engagement with stakeholders.
Deloitte’s submission to the OECD noted that there is no clearly defined and separate digital economy. ‘Instead, there is integration of digital models into traditional businesses and also the evolution of wholly digital business models.’ There needs to be a recognition that lower sales in store were enabling higher online sales, the firm said, ‘most likely through appropriate application of transfer pricing and the arm’s length principle’.
Bill Dodwell, Deloitte’s head of tax policy, wrote: ‘The challenge for the OECD/G20 will be in designing tax principles that deal with the inevitability of digital business models having a smaller number of locations to deliver a wide choice of services and products, enabled by technology.’
The CIOT suggested that digital businesses were ‘not sufficiently different’ from non-digital business to merit a distinct set of tax rules. ‘There may be specific issues around permanent establishments and profit attribution, but these are capable of resolution by existing law and principle,’ said Glyn Fullelove, chairman of the CIOT’s international taxes sub-committee.
The International Bar Association’s taxes committee said it wished to emphasise the importance of ‘taxing a business in the same way regardless of whether the business model used is a traditional model or a digital economy model, under which technology has made it possible to find new ways and methods of achieving basically the same result’. The committee’s co-chairman Stuart Chessman wrote: ‘Many of the issues, tax planning opportunities and potential abuses presented by the digital economy exist equally in many other businesses, especially those where intellectual property is valuable. A focus exclusively on the digital economy will unfairly affect the electronic delivery of goods and services without addressing comparable issues in other industries.’
In a submission on behalf of the BEPS Monitoring Group, Sol Picciotto, a senior adviser to the Tax Justice Network, said the digital economy had ‘greatly facilitated tax-driven restructuring’ of groups. ‘Our point is that location decisions have become distorted by tax rules which allow, indeed encourage, the artificial separation of functions and their attribution to affiliates which are in fact under common control, but are treated as separate and independent for tax purposes,’ he wrote.
The OECD has published comments received on its discussion paper on the tax challenges presented by the digital economy. The respondents included Deloitte, the CIOT, the International Bar Association and the BEPS Monitoring Group, which includes representatives of Christian Aid and the Tax Justice Network. An OECD task force on the digital economy will discuss the responses early next month. On 23 January, a live webcast presentation by the OECD’s Centre for Tax Policy and Administration will include an overview of the BEPS project and an ‘update on 2014 deliverables’; the involvement of developing countries; and engagement with stakeholders.
Deloitte’s submission to the OECD noted that there is no clearly defined and separate digital economy. ‘Instead, there is integration of digital models into traditional businesses and also the evolution of wholly digital business models.’ There needs to be a recognition that lower sales in store were enabling higher online sales, the firm said, ‘most likely through appropriate application of transfer pricing and the arm’s length principle’.
Bill Dodwell, Deloitte’s head of tax policy, wrote: ‘The challenge for the OECD/G20 will be in designing tax principles that deal with the inevitability of digital business models having a smaller number of locations to deliver a wide choice of services and products, enabled by technology.’
The CIOT suggested that digital businesses were ‘not sufficiently different’ from non-digital business to merit a distinct set of tax rules. ‘There may be specific issues around permanent establishments and profit attribution, but these are capable of resolution by existing law and principle,’ said Glyn Fullelove, chairman of the CIOT’s international taxes sub-committee.
The International Bar Association’s taxes committee said it wished to emphasise the importance of ‘taxing a business in the same way regardless of whether the business model used is a traditional model or a digital economy model, under which technology has made it possible to find new ways and methods of achieving basically the same result’. The committee’s co-chairman Stuart Chessman wrote: ‘Many of the issues, tax planning opportunities and potential abuses presented by the digital economy exist equally in many other businesses, especially those where intellectual property is valuable. A focus exclusively on the digital economy will unfairly affect the electronic delivery of goods and services without addressing comparable issues in other industries.’
In a submission on behalf of the BEPS Monitoring Group, Sol Picciotto, a senior adviser to the Tax Justice Network, said the digital economy had ‘greatly facilitated tax-driven restructuring’ of groups. ‘Our point is that location decisions have become distorted by tax rules which allow, indeed encourage, the artificial separation of functions and their attribution to affiliates which are in fact under common control, but are treated as separate and independent for tax purposes,’ he wrote.
