The Organisation for Economic Co-operation and Development has issued a statement reaffirming its commitment to resolve the tax challenges of digitalisation by the end of the year.
What can you take from this statement?
Of most significance was the agreement by the Inclusive Framework - a collaboration of 137 countries - to continue discussions on Pillar 1 of the proposals. This focuses on changing international tax rules, so that multinational enterprises that lead business in locations without a physical presence can be taxed, which draws heavily on a Unified Approach. This approach was put forward by the OECD Secretariat in October 2019, but it did not have all of the Inclusive Framework’s endorsement.
The OECD has previously clarified that all discussions of the Inclusive Framework take place on a ‘without prejudice basis’, which means that nothing is agreed until everything is agreed. But, endorsement to continue discussions on one proposal (the Unified Approach), rather than the number of competing proposals put forward by individual countries to date, does represent a significant step forward.
Although, this is not the end of the ro
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