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:

October 2019
by Martin Hearson

Yesterday the OECD secretariat published its proposed ‘unified approach’ to update corporate tax rules for the digital era, or at least for one of the project’s two pillars. The proposal is designed to be “the basis for a negotiation that could result in a political agreement by mid-2020.” This agreement is to be made via…

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August 2019
by Anthony Kibirige

Intangible assets are more valuable than ever before. The Global Intangible Finance Tracker found that 52% of the overall enterprise value of all publicly traded companies worldwide resides in intangibles, with a total worth of US$57.3 trillion. In some sectors like cosmetics, internet and software, media, and drinks, intangibles account for 80-90% of enterprise value….

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News and Events:

July 2019
news
Taxing the digitalising economy: A critical development challenge

The Institute of Development Studies asked us to reflect on the question: “What are the critical global challenges of our time?” Martin Hearson, who leads our international tax research programme, shared his thoughts: This week @IDS_UK asked us to share our thoughts on #GlobalDevTrends🌍 Our Research Fellow @martinhearson says a critical trend is the #digitalisation…

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July 2019
news
ICTD convenes international workshop on tax challenges of the digitalisation of the economy

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. Earlier this month ICTD, together with the BEPS Monitoring Group, held a two-day workshop in London to discuss the implications of these developments for developing countries….

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Key Resources:

Policy Documents

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.
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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
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.
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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.
See resource
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
See resource
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.
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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.
See resource
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