Next steps towards taxation of the global digital economy

The Organisation for Economic Co-operation and Development (OECD) inclusive framework has issued a policy note setting out two main areas for renewed international discussions on agreeing a long-term solution for taxation of the digital economy by 2020.

The first will focus on modifying current transfer pricing rules to take into account the changes that digitalisation has brought to the world economy. This will require a review of the ‘nexus’ rules – namely how to determine the connection a business has with a given jurisdiction – and the rules that govern how much profit should be allocated to the business conducted there. The inclusive framework will look at proposals based on the concepts of marketing intangibles user contribution and significant economic presence.

The second aims to resolve remaining base erosion and profit shifting issues and will explore two sets of interlocking rules intended to give jurisdictions a remedy in cases when income...