Taxing the Digitalising Economy

Image credit: © Tax Justice Network, pxhere

During 2019 and 2020, governments of over 130 countries, led by the OECD and G20, are considering radical reforms to international rules that shape the taxation of multinational companies. Originally a response to the political outcry when it was reported that large companies such as Google and Facebook pay little tax in many countries in which they operate, it has become an agenda for potentially radical reform to adapt a century-old set of tools to the 21st century economy. ICTD’s work on this topic supports research and debate to help low-income countries navigate a fast-paced and technically complex agenda with a lot at stake.

If you would like to suggest material for our list of key resources or contribute a piece of commentary, please get in touch with us at info@ictd.ac

Blogs:

July 2020
by Jeroen Lammers

Developing countries lose substantial revenues every year to corporate tax avoidance, exacerbated by globalization and digitalization. As part of the OECD/G20 project on addressing the tax challenges of the digitalization of the economy, the OECD secretariat have recently presented the Unified Approach (UA) to deal with the tax revenue losses from digitalization, by giving market…

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May 2020
by Alexander Ezenagu, Alexandra Readhead, Allison Christians, Anthony Kibirige, Catherine Ngina Mutava, Joy Ndubai, Lakshmi Narayanan, Mike Durst, Mustapha Ndajiwo & Sol Picciotto

The OECD secretariat recently proposed a “stock taking exercise” to “re-examine how international tax rules currently meet the needs of developing countries” leading potentially to a “new deal on international taxation as part of the international effort to rebuild economic life in the post Covid-19 era.” The OECD’s Pascal Saint-Amans has suggested that this may…

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News and Events:

April 2020
news
ICTD analyses global corporate tax negotiations

Since the start of 2019, global discussions on corporate tax reform have proceeded under the auspices of the OECD and the G20. In October, the OECD secretariat published its “unified proposed” under Pillar One, aimed at providing a framework for a global redistribution of taxing rights. This proposal has been endorsed by both the OECD’s…

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November 2019
news
Tax Notes Talk Podcast: Digitalisation and Developing Countries

David Stewart interviewed ICTD Research Fellow Martin Hearson for the Tax Notes Talk Podcast. The two discussed how the OECD’s work on the taxation of the digital economy affects developing countries, and how they have reacted to the OECD Secretariat’s “Unified Approach under Pillar 1” proposal. Listen to the episode here. Forbes subsequently published the podcast…

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Key Resources:

Policy Documents

Intergovernmental Organisation
Coronavirus (Covid-19): Update on OECD tax work
by OECD (March, 2020)
The OECD has provided an update on how global negotiations to address the tax challenges arising from digitalisation will continue amidst the coronavirus emergency.
See resource
Intergovernmental Organisation
OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors
by OECD (February, 2020)
The OECD’s progress report to the G20 setting out work completed and open questions on its large-scale global digital tax reform project.
See resource
Intergovernmental Organisation
OECD presents analysis showing significant impact of proposed international tax reforms
by OECD (January, 2020)
Initial impact assessments from the OECD indicate that proposed solutions to the tax challenges arising from the digitalisation of the economy could raise global tax revenues by USD 100 billion annually.
See resource
Intergovernmental Organisation
ATAF’s opinion on the Inclusive Framework Pillar One (including the Unified Approach) and Pillar Two proposals to address the tax challenges arising from the digitalisation of the economy
by ATAF (November, 2019)
This document sets out areas in which the organisation representing African tax authorities supports OECD proposals, and where it has concerns.
See resource
Intergovernmental Organisation
Public comments received on the Global Anti-Base Erosion (GloBE) Proposal under Pillar Two
by OECD (November, 2019)
A compilation of submissions to the OECD in response to its proposals related to minimum taxes, outlined in the Inclusive Framework’s May 2019 Programme of Work.
See resource
Intergovernmental Organisation
Public comments received on the OECD Secretariat Proposal for a "Unified Approach" under Pillar One
by OECD (November, 2019)
A compilation of submissions to the OECD in response to its proposal for taxing corporate profits outlined in the Inclusive Framework’s May 2019 Programme of Work.
See resource
Intergovernmental Organisation
The Global Anti-Base Erosion (GloBE) Proposal - Pillar Two
by OECD (November, 2019)
This is the second of two consultation documents published by the OECD secretariat. Its proposed set of rules would allow countries to tax multinational companies where they do not already pay a minimum amount of tax.
See resource
Intergovernmental Organisation
International Tax Reform, Digitalization, and Developing Economies
by Colin Clavey et al (October, 2019)
This World Bank discussion paper considers the needs of developing countries in the area of taxing the digitalisating economy, and discusses different options for reform
See resource
Intergovernmental Organisation
An Assessment of Global Formula Apportionment
by IMF (October, 2019)
A working paper by IMF staff that assesses the impact of sharing out companies’ taxable profits through various formulae. Although this is not a proposal under active consideration, the results are relevant to ‘Amount A’ in the OECD’s proposed unified approach for ‘Pillar One’ of its tax and digitalisation project.
See resource
Intergovernmental Organisation
Secretariat Proposal for a “Unified Approach” under Pillar One
by OECD (Inclusive Framework on BEPS) (October, 2019)
This is the first of two consultation documents published by the OECD secretariat. It aims to reconcile the three proposals for taxing corporate profits outlined in the Inclusive Framework’s May 2019 Programme of Work.
See resource
Intergovernmental Organisation
3rd Technical Note: Inclusive Framework proposals to address the tax challenges arising in Africa from the digitalisation of the economy
by ATAF (July, 2019)
A response from the ATAF Cross-Border Tax Technical Committee to the issues raised in the Inclusive Framework’s programme of work. The note identifies some specific areas of concern as well as topics requiring further consideration.
See resource
Intergovernmental Organisation
Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy
by OECD (Inclusive Framework on BEPS) (May, 2019)
Paper summarising agreement reached at the OECD Inclusive Framework during the first half of 2019, including three options for reform that respond to the proposals set out in January.
See resource
Intergovernmental Organisation
The place of Africa in the shift towards Global Tax Governance: Can the taxation of the digitalised economy be an opportunity for more inclusiveness?
by ATAF (May, 2019)
Commentary on the OECD discussions from the African Tax Administration Forum, which discusses how African countries can make more effective use of the inclusive Framework.
See resource
Government
Report on Profit Attribution to Permanent Establishments
by Committee to Examine the issues related to Profit Attribution to Permanent Establishment (PE) in India / Government of India (April, 2019)
A proposal from the Indian government to reform its approach to taxing multinational companies, in a manner consistent with the G-24 proposal tabled three months earlier.
See resource
Intergovernmental Organisation
Tax Issues related to the Digitalization of the Economy
by Committee of Experts on International Cooperation in Tax Matters / UN (April, 2019)
A paper by the UN tax committee's subcommmitee on taxation of the digital economy that offers a commentary on the discussions at the OECD's Inclusive Framework and their implications for developing countries.
See resource
Intergovernmental Organisation
Public comments received on the possible solutions to the tax challenges of digitalisation
by Various authors / OECD (March, 2019)
A compilation of submissions to the OECD in response to its paper on Addressing the Tax Challenges of the Digitalisation of the Economy, as well as video from a public consultation held at its headquarters in Paris.
See resource
Intergovernmental Organisation
Corporate Taxation in the Global Economy
by International Monetary Fund (March, 2019)
IMF board paper that discusses the strengths and weaknesses of a number of proposals for reforming international corporate tax rules and their implications for developing countries.
See resource
Intergovernmental Organisation
Addressing the Tax Challenges of the Digitalisation of the Economy: Public Consultation Document
by OECD (Inclusive Framework on BEPS) (February, 2019)
Paper summarising agreement reached at the OECD Inclusive Framework to consider radical reforms to international tax rules, and outlining a number of proposals from developed and developing countries.
See resource
Intergovernmental Organisation
2nd Technical Note: Inclusive Framework proposals to address the tax challenges arising in Africa from the digitalisation of the economy
by ATAF (February, 2019)
The ATAF secretariat’s summary of the three proposals in the OECD’s public consultation document, and a discussion of how African countries can work through ATAF to respond.
See resource
Intergovernmental Organisation
Addressing the Tax Challenges of the Digitalisation of the Economy – Policy Note
by OECD (Inclusive Framework on BEPS) (January, 2019)
Short paper summarising agreement reached at the OECD Inclusive Framework to consider radical reforms to international tax rules, and outlining a number of proposals from developed and developing countries.
See resource
Intergovernmental Organisation
Proposal for Addressing Tax Challenges Arising from Digitalisation
by G-24 Working Group on tax policy and international tax cooperation (January, 2019)
Proposal to reform international tax rules from a group of developing countries, led by India, Colombia and Ghana, aimed at influencing discussions in the OECD's Inclusive Framework.
See resource
Intergovernmental Organisation
1st Technical Note: The tax challenges arising in Africa from the digitalisation of the economy
by ATAF (January, 2019)
This document sets out the position of ATAF’s Cross-Border Tax Technical Committee ahead of the OECD Inclusive Framework meeting at which the broad direction of travel was agreed.
See resource
Intergovernmental Organisation
Fair Taxation of the Digital Economy
by European Commission (March, 2018)
A package of measures proposed by the European Commission focused on the challenges being considered by the OECD, including both a long term solution compatible with OECD tax rules, and a controversial interim solution that was disliked by some EU members as well as by the United States.
See resource
Intergovernmental Organisation
Tax Challenges Arising from Digitalisation – Interim Report 2018
by OECD (Inclusive Framework on BEPS) (March, 2018)
Report endorsed by the OECD's Inclusive Framework, including developing as well as developed countries, which gives a conceptual framework explaining why digitalisation challenges existing tax rules, and proposes to reach an agreed solution by 2020.
See resource
Intergovernmental Organisation
Addressing the Tax Challenges of the Digital Economy, Action 1 - 2015 Final Report
by OECD (October, 2015)
The final report from the OECD's 'BEPS' project's workstream on the digital economy. This report emphasises that digitalisation is a transformation across the economy, rather than limited to a few large technology firms. It doesn't give a solution to the problems identified.
See resource
Intergovernmental Organisation
Protecting the Tax Base in a Digital Economy
by Jinyan Li / UN (June, 2015)
Chapter from a UN tax committee handbook discussing the challenges of tax planning by highly digitalised firms from a developing country perspective.
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Intergovernmental Organisation
Action Plan on Base Erosion and Profit Shifting
by OECD (July, 2013)
The work programme for the OECD's 'BEPS' project between 2013 and 2015, which was intended in part to address the difficulties face dby governments taxing large digitalised businesses.
See resource
Intergovernmental Organisation
Addressing Base Erosion and Profit Shifting
by OECD (February, 2013)
The report that launched the OECD's 'BEPS' project, in part a response to the public controversies surrounding tax planning by large digital firms.
See resource
Government
Report of the Task Force on Taxation of the Digital Economy
by Pierre Colin & Nicholas Colin / Government of France (January, 2013)
A report for the French government that discussed the ways in which highly digitalised business models differ from conventional business models, and how international tax rules could adapt.
See resource

Commentary

Civil Society
What Is at Stake for the Mining Sector in the Global Digital Tax Reforms?
by Alexandra Readhead and Thomas Lassourd (March, 2020)
This analysis provides an overview of the key issues at stake for the mining sector and mining countries in global digital tax reforms, surveying the potential impacts of the OECD’s Pillar I and Pillar II.
See resource
Academic
Preliminary Analysis of KPMG Transfer Pricing Study for OECD Digital Tax Proposal
by Allison Christians (March, 2020)
This study analyses the design of so-called “Amount B” under the OECD’s proposed model for Pillar 1, discussing a recent KPMG study finding little need for country-specific adjustments to marketing and distribution returns.
See resource
Civil Society
A Pyrrhic victory for the OECD?
by Alex Cobham, Tax Justice Network (January, 2020)
The Tax Justice Network critically assesses recent progress in the OECD/G-20 digital tax project and projects potential scenarios for the future.
See resource
Academic
The OECD Global Anti-Base Erosion (“GloBE”) proposal
by Michael P. Devereux with François Bares, Sarah Clifford, Judith Freedman, İrem Güçeri, Martin McCarthy, Martin Simmler and John Vella (January, 2020)
This paper looks at the OECD’s Global Anti-Base Erosion (GloBE) proposal, providing a policy analysis and looking at the effects on revenues and incentives. It also looks at the potential constraints placed by EU law on the design of the GloBE proposal.
See resource
Academic
Corporate Tax Negotiations at the OECD: What’s at Stake for Developing Countries in 2020?
by Martin Hearson (January, 2020)
This paper describes the proposals for corporate tax reform under consideration at the Inclusive Framework and highlights some of the issues for developing countries.
See resource
Academic
Addressing the Challenges of Taxation of the Digital Economy: Lessons for African Countries
by Solomon Rukundo (February, 2020)
This paper examines legislative and policy approaches to taxing the digital economy adopted by different jurisdictions around the world and the lessons that African countries can draw from these experiences.
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Academic
The EU Commission’s digital tax proposals and its cross-platform impact in the EU and the OECD
by Wouter Lips (December, 2019)
This analysis shows how the digital tax agenda has been pushed into the global political spotlight by the political activism of the European Commission.
See resource
Civil Society
ICRICT response to the OECD Consultation on Global Anti-Base Erosion Proposal (“GloBE”)
by ICRICT (December, 2019)
The Independent Commission for the Reform of International Corporate Taxation responds to the OECD’s “GloBE” proposal, urging a high minimum rate and strong enforcement
See resource
Civil Society
Where next for global taxing rights?
by Tax Justice Network (December, 2019)
Slides and videos from a virtual conference debating the Inclusive Framework reforms
See resource
Academic
Digitalization and Developing Countries
by David D. Stewart and Martin Hearson (November, 2019)
Tax Notes Talk podcast episode with Martin Hearson and David D. Stewart, discussing how the OECD’s work on taxation of the digital economy affects developing countries.
See resource
Civil Society
Taxing Intangibles, Financial Technology (FinTech) and the Digitalised Economy
by Tax Justice Network Africa (October, 2019)
Materials from the 7th Pan-African Conference on Illicit Financial Flows in Nairobi, which focused on taxing the digitalised economy.
See resource
Civil Society
International Corporate Tax Reform: towards a fair and comprehensive solution
by ICRICT (October, 2019)
This paper gives a perspective on the OECD’s Programme of Work from the Independent Commission for the Reform of International Corporate Taxation
See resource
Academic
Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals
by Alex Cobham, Tommaso Faccio and Valpy FitzGerald (October, 2019)
This paper provides an evaluation of the redistribution of taxing rights associated with the leading proposals of the OECD, IMF and the Independent Commission for the Reform of International Corporate Taxation (ICRICT).
See resource
Civil Society
International Corporate Tax Reform and The ‘New Taxing Right’
by The BEPS Monitoring Group (September, 2019)
A summary of the detailed discussions that took place at a workshop on 4-5 July attended by senior officials from the OECD and the UN Tax Committee and from several tax authorities in Africa, as well as twelve BMG members and other researchers.
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Academic
Re-Allocation of Taxing Rights for Big Data Business Models
by Johannes Becker, Joachim Englisch and Deborah Schanz (August, 2019)
An alternative proposal for international tax reform that incorporates digitalisation without explicitly seeking to redistribute the tax base
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Media
Africa demands taxing rights on digital economy
by Prosper Ndlovu (August, 2019)
A summary of the ATAF High-Level Tax Policy Conference on the theme “Ensuring Africa’s voice in the debate on taxing the digital economy”.
See resource
Academic
Taxing the Digitalised Economy: Closing in on Reform
by Oxford University Centre for Business Taxation (July, 2019)
Videos from a conference at the Said Business School, in which participants from international organisations, governments, businesses and academia discussed the challenges of taxing digitalised multinationals.
See resource
Media
A rare chance to fix the global corporate tax system
by Jose Antonio Campo / Financial Times (July, 2019)
Op-ed from the co-chair of the Independent Commission for the Reform of International Corporate Taxation arguing for radical reform through the Inclusive Framework discussions.
See resource
Media
Is Africa equipped to tax its digital economy?
by CNBC Africa (July, 2019)
Interview with Michael Hewson, Director of an African Transfer Pricing Advisory Firm, on taxing the digital economy in Africa.
See resource
Civil Society
The greatest opportunity for reallocating taxing rights in a generation: now or never for the OECD
by Tax Justice Network (April, 2019)
Commentary on the OECD discussions from a campaign group that urges radical reform to give developing countries a greater share of the tax base from multinational companies.
See resource
Academic
Residual Profit Allocation by Income
by Michael Devereux et al (March, 2019)
A proposal for corporate tax reform originally drafted before the OECD’s “Unified approach” was published in October 2019, but on which the OECD proposal appears to draw.
See resource
Media
Corporate Taxation in the Global Economy
by Christine Lagarde, IMF (March, 2019)
Blog by the Managing Director of the IMF to coincide with the launch of its paper on 'Corporate Taxation in the Global Economy'. Available in عربي, 中文, Español, Français, 日本語, Português, Русский.
See resource
Academic
The Digital Services Tax as a Tax on Location-Specific Rent
by Wei Cui and Nigar Hashimzade / SSRN (February, 2019)
A proposal for treating the challenges of taxing the digital economy in a similar way to the taxation of oil, gas and mining industries.
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Business
Taxing the Digital Economy – Why is Africa not getting its fair share?
by Craig Kirsten / BDO South Africa (February, 2019)
Discussion from a South African accountancy and business advisory firm of the digital taxation debate and the OECD process from an African perspective.
See resource
Business
Business Principles for Addressing the Tax Challenges of the Digitalizing Economy
by BIAC Committee on Taxation and Fiscal Policy (January, 2019)
A set of principals from the main business lobby group at the OECD designed to influence discussions in the Inclusive Framework.
See resource
Media
How Apple Sidesteps Billions in Taxes
by Charles Duhigg and David Kocieniewski / New York Times (April, 2012)
One of the first and most influential media articles discussing the tax planning strategies of large digital companies.
See resource
Media
Google 2.4% Rate Shows How $60 Billion Is Lost to Tax Loopholes
by Jesse Drucker / Bloomberg News (October, 2010)
One of the first and most influential media articles discussing the tax planning strategies of large digital companies.
See resource