What we’re working on: Tax policy for the digital economy

  • 3 December 2018

In an era of unprecedented digital transformation, taxation of the digitalised economy is a leading topic on the global tax agenda.

Proposals at regional and national level have ensued in recent months, as governments around the world have proposed varying solutions.  ICC supports a harmonised approach to ensure that international tax rules remain relevant and applicable in an increasingly digitalised global economy and holds the view that any measures should seek an alignment with global efforts.  ICC recommends that any change of international rules or principles should be done through a comprehensive, coherent and co-ordinated approach.

The digital economy is not only revolutionising the way businesses operate but also creates new opportunities for global growth and prosperity. If nurtured appropriately, 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.

“The digitalisation of the economy raises challenging issues,” said Christian Kaeser, Chair of the ICC Commission on Taxation and Global Head of Tax at Siemens.  “ICC underlines the need for countries to collectively discuss and address the tax challenges arising from digitalisation, 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.”

A new tax framework for the digital economy

In light of the prominence of this topic, ICC has convened a group of business experts to develop a policy framework of internationally established tax principles for consideration in determining relevant policies to address the taxation of the digitalised economy.  The framework is intended to help define the contours of a suitable tax framework for the digitalised economy that encourages business activities, job creation and economic growth. It also reinforces the need to build a coherent international regulatory framework for world business which builds on principles that can accommodate continued evolution in digitalised business models. As digitalisation continues to be an important driver for global economic growth, policies related to taxation of the digitalised economy should seek to promote, and not hinder, economic growth and cross-border trade and investment.

ICC welcomes, in principle, the multilateral approach by the Organisation for Economic Cooperation and Development (OECD), with the global engagement of more than 110 OECD Inclusive Framework members, to build consensus to address the taxation of the digitalised economy.  The OECD Interim Report “Tax challenges arising from digitalisation” released to G20 leaders earlier this year recognises 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.  In its “Report to G20 Leaders” at the G20 Summit in December 2018 in Buenos Aires, the OECD Secretary General expresses his hope that at the next G20 Summit the Leaders will be able to “celebrate an agreement on the what and how of a long-term solution to be delivered in 2020.”

As European finance ministers will convene on 4 December to decide on the proposed digital services tax (DST), ICC—representing over 45 million companies globally—strongly recommends that any measures being considered be aligned with global efforts to ensure consistency and coherence and to avoid double and over-taxation.

Also anticipated this week is the meeting of the OECD Task Force on the Digital Economy to advance discussions on the issue.  ICC echoes the view that any tax reforms should be both practicable and effective in facilitating greater consistency internationally.

ICC remains committed to providing knowledge and expertise on behalf of business with a view towards determining a long-term global solution to address taxation of the digitalised economy.

Read more about ICC’s global tax work.