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International community agrees on a road map for resolving the tax challenges arising from digitalization of the economy

  • OECD (Organisation for Economic Co-operation and Development) Image

May 31, 2019

On May 31, 2019, the Or­gan­i­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) announced that the international community has agreed on a road map for resolving the tax challenges arising from the digitalization of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020.

The 129 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinational enterprises. The document, which calls for intensifying international discussions around two main pillars, was approved during the May 28-29, 2019 plenary meeting of the Inclusive Framework. It will be presented by OECD Secretary-General Angel Gurría to G20 Finance Ministers for endorsement during their June 8-9, 2019 ministerial meeting in Fukuoka, Japan.

The Programme of Work will explore the technical issues to be resolved through the two main pillars. The first pillar will explore potential solutions for determining where tax should be paid and on what basis ("nexus"), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located ("profit allocation"). The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax. This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address remaining issues identified by the OECD/G20 BEPS initiative.

Re­view the press re­lease  on the OECD's web­site.

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