OECD’s project on tax issues facing the digital economy

KEY POINTS

• Public criticism of the low tax rates on digital businesses has led to mounting political pressure for change.
• The OECD project on digitalisation of the economy seeks to alter the existing tax rules.
• New profit allocation rules and a global anti-base erosion mechanism are required.
• Has the OECD failed to recognise and address the fiscal challenges of digitalisation?
• A global anti-base erosion mechanism has the potential to increase worldwide tax revenues.

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There’s a loud and clear consensus across the tax profession that digitalisation performs a stress test on the international taxation system. Increased public criticism of the low effective tax rates of highly profitable highly digitalised businesses and business models that create value through interaction with consumers has led to mounting political pressure for change. We are now playing catch up. The challenge for politicians and tax professionals alike is to create a tax system that is better...

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