The OECD member states have agreed to move ahead with the plan to reach a global solution by 2020 to harmonise tax regimes on the digital companies.
The OECD and the G20 have a joint working mechanism, called Inclusive Framework, to address the tax issues related to digital economy, what are covered under an umbrella concept of Base Erosion and Profit Shifting (BEPS).
After the most recent Inclusive Framework meeting held 23-24 January, a Policy Note was published to outline the agreed framework of the future solution.
Countries have agreed to explore potential solutions that would update fundamental tax principles for a twenty-first century economy, when firms can be heavily involved in the economic life of different jurisdictions without any significant physical presence and where new and often intangible drivers of value become more and more important,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration.
We are now exploring this issue and possible solutions,” Saint-Amans added.
In essence, the solution will be based on consensus on two key areas, or “pillars”: “One pillar addresses the broader challenges of the digitalised economy and focuses on the allocation of taxing rights, and a second pillar addresses remaining BEPS issue,” as the Note put it.