In 1999, the Organisation for Economic Co-operation and Development (OECD) led a worldwide inquiry into this question: Are traditional international tax principles and treaty rules fit for the challenges of the world’s burgeoning digital economy? Six years later, the OECD’s Technical Advisory Group (TAG) concluded that existing concepts were sufficient1. Fast forward to 2013, with the digital economy more prolific than ever and paying one’s fair share of tax under the microscope, the OECD along with countries such as Australia and the UK, are re-assessing the issues and seeking new approaches.
In evaluating the best way forward, KPMG’s network of member firm tax professionals believe that it is best to set aside the emotions taking over the recent debates and bring the discussion back to a systematic and objective review of current business practices, existing taxation principles and possible alternatives. As the OECD begins to implement its Action Plan, it is important to focus on and discuss these three key questions:
- Re-assessing the systematic approach – Are there compelling reasons to change the systematic approach taken by the TAG in performing its similar evaluation from 1999 to 2005?
- Distinguishing how fact patterns have changed – What significant changes have occurred since 2005 to business models, transactions in the digital domain and other considerations on which the TAG based its conclusions?
- Identifying and evaluating the alternatives – What alternative solutions have been discussed within the tax community since 2005, and how do they stack up against a set of evaluation criteria to be defined?
Join the debate
KPMG member firms welcome this important debate and look forward to engaging with the international tax community. We strongly believe that effective, widely-accepted approaches can only be formed through collaboration and participation of a broad group of tax professionals working in business, government and public practice. To this end, KPMG is pleased to launch a forum that seeks to aggregate the global discussions and serve as a catalyst for developing consistent, fair and effective approaches to international taxation in the digital age.
To get involved and find out more, visit digital tax debate.
1Are the current rules for taxing business profits appropriate for e-commerce? Final Report, OECD Centre for Tax Policy and Administration (OECD Publishing), November 2002.