The increasing digitization of society and business has led to a completely different and constantly changing economic landscape. The current tax rules are still largely based on the ‘old’ economy in which physical presence in a country was often required for companies to do business locally. With the advent of internet, smartphones and other technological developments, this has completely changed. It is clear that the tax rules need to be adapted to bring them into line with current economic realities.
For companies in the digital economy, but also for traditional multinationals that are increasingly digitizing, it is important that new tax rules are enforceable and do not lead to double taxation. In order to avoid an international patchwork of different tax measures, it is important to find a common solution for the taxation of the digital economy on a global basis.
This topic has therefore long been high on the agenda of international organizations, such as the European Union and the Organisation for Economic Cooperation and Development (OECD). By means of the so-called ‘Inclusive Framework’, the OECD/G20 is currently working on a proposal to achieve, by 2020 at the latest, a global solution for the challenges posed by the digitization of the global economy on profit tax. The scope of these proposals goes beyond the technology companies that operate entirely online; even the more traditional multinationals may soon be affected by these (potential) international tax measures.
The success of this OECD/G20 project will play an important role in future taxation of the digital economy. In the absence of agreement on a global solution, it is likely that countries, or groups of countries (such as the European Union), will independently introduce new tax measures for the digital economy, creating an international patchwork of different, uncoordinated tax measures that could harm the global economy.
OECD Update January 31, 2020
By means of a webcast, the OECD confirmed on Friday January 31 that an outline for global taxation of multinationals has been agreed: Unified Approach (Pillar 1). See our initial findings on the OESO update in our one-pager (in English). You can download the one-pager here.
KPMG Meijburg & Co closely monitors the developments concerning taxation of the digital economy. We would like to keep you informed of the latest developments via our Digital Economy topic-page. On this page you will find articles and blogs about the digital economy.
If you have any questions about developments in the field of the digital economy and what these may mean for your company, please feel free to contact us.