ICC: Digital tax rules should be global and long-term in scope

  • 22 March 2018
ICC March 2018 Digital Tax Recommendations

Recent months have seen governments around the world lay out proposals for taxing the digital economy. ICC recommends that any measures be developed on the basis of international tax rules and seek an alignment with global efforts.

Yesterday, the European Commission released two legislative proposals for taxing of digital firms ahead of the European Union (EU) leaders’ summit on 22-23 March, where the issue will be discussed further. The previous week, the Organisation for Economic Cooperation and Development (OECD) released a report on “tax challenges arising from digitalisation” and signalled that more than 110 countries will work to build a consensus on digital tax by 2020 within the OECD/G20 Inclusive Framework on base erosion and profit-shifting (BEPS).

As the world business organization, ICC has welcomed the OECD report and the global engagement of OECD Inclusive Framework members. The OECD report recognizes that there are technical and complex questions regarding taxing rights and profit allocation and that in-depth analysis and a collaborative effort is required to address these challenges.

Christian Kaeser, Chair of the ICC Commission on Taxation and Global Head of Tax at Siemens AG, said:

“ICC applauds the multilateral approach by the OECD, which seeks alignment at the international level to address the taxation of the digital economy in a manner that facilitates economic growth. We strongly recommend that any measures be developed on the basis of international tax rules and seek an alignment with global efforts to address the tax challenges arising from digitalisation.”

Global solutions for a global challenge

ICC underlines the urgent need for countries to collectively discuss and resolve any potential tax challenges of the digital economy they may perceive, 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. ICC concurs with the OECD BEPS Action 1 Report conclusions—reiterated in the interim report—that “it would be impossible to ring-fence the digital economy for tax purposes”.

The European Commission proposals include the introduction of an interim turnover-based tax (equalisation levy), where businesses would be taxed based on revenue as opposed to profits. ICC acknowledges the commitment to establish a common EU approach on the taxation of the digital economy, and strongly recommends that any measures being considered be aligned with global efforts to ensure consistency and coherence and to avoid double and over-taxation.

ICC remains committed to working with the OECD and the European Commission, providing knowledge and expertise on behalf of business with a view towards determining a long-term global solution to address taxation of the digital economy.