Digitalisation is revolutionising the way businesses operate but is also creating new opportunities for global growth and prosperity. Technological advances and digital connectivity can spur innovation in business models, business networking and knowledge transfer while also facilitating access to international markets for businesses large and small, old and new.
As the institutional representative of more than 45 million companies in over 100 countries, ICC fully supports a harmonised approach to ensure that international tax rules remain relevant and applicable in an increasingly digitalised global economy and recognises the efforts by the OECD to enable countries, within the context of the Inclusive Framework (of over 130 countries), to work collaboratively towards the development of a multilateral consensus-based solution to reform the international tax system.
In this respect ICC welcomes the opportunity for further stakeholder consultation following the OECD’s release this week of the Pillar 1 (profit allocation and nexus rules) and Pillar 2 (minimum tax) Blueprints, as well as the accompanying economic impact and investment effects assessments, which are indicative of the progress made in further developing the proposed package. In view of the current economic downturn in the wake of the COVID pandemic, the increased political pressure to deliver a solution has become ever more prevalent.
While the OECD has made some significant strides in developing the technical work of the proposals, ICC notes that some key elements (both technical and practical) that are essential to the delivery of the package are yet to be agreed on by participating countries. These include agreement on the scope, quantum, rate, rule coordination, effective and contemporaneous adoption globally, dispute resolution mechanisms as well as interaction with other reform initiatives in this context.
“ICC underlines the need for countries to collectively discuss and address the tax challenges arising from the digitalisation of the economy, through mutual consensus, and reiterates that any solutions should be long-term and have broad adoption by countries to allow for seamless application for business,” said Christian Kaeser, Chair of the ICC Commission on Taxation and Global Head of Tax at Siemens. “ICC encourages all participating countries in the Inclusive Framework to garner their collective efforts through a comprehensive, coherent and co-ordinated approach to move swiftly to a global consensus to deliver new rules that are administrable, increase tax certainty and embed measures against double taxation.”
As fundamental changes to the international tax framework are being considered, ICC stresses the importance of having robust dispute avoidance and dispute resolution mechanisms in place. New concepts of taxing companies and allocating profits to countries may be subject to different interpretations and the business community will most likely risk being confronted with increasing instances of double taxation. The risk of double taxation in such circumstances would discourage cross-border trade and investment – which would be harmful for both countries and for businesses of all sizes.
ICC recognises that further work is needed to further develop the existing proposals. ICC remains committed to providing knowledge and expertise on behalf of business with a view toward determining a long-term global solution to address the taxation of the digitalised economy.
ICC advocates for a consistent global tax system, founded on the premise that stability, certainty and consistency in global tax principles are essential for business and will foster cross-border trade and investment.