11th June 2019 – Rob Mander, International Tax Leader, RSM: “The OECD’s digital tax roadmap was a welcome step in the right direction and it is encouraging that the G20 Finance Ministers have accepted their recommendations. Digital Tax proposals have already been announced or implemented in many countries, so the pressure has been on the OECD to deliver a global outcome that is better than the “go it alone” approach. There also seems to be a recognition from the OECD that the new rules need to apply to all businesses. This is a positive approach. In today’s world, digital is part of most businesses not only those whose primary offering is digital in nature.
“The digital tax measures introduced by countries such as the UK and France have turned up the volume. The G20 has accepted that single country solutions are not the end game that they are after, so ironically by going it alone those countries (and others) have likely accelerated the process. Both countries have stated that their digital taxes will be repealed when a OECD/G20 global solution is found.
“While the roadmap contains some sensible proposals, the road to implementation will not be an easy one. While 129 countries have agreed to the plan in principle, and the G20 have added their approval, it’s one thing to agree to the work plan and another to agree to the results that are produced. Strong political support is going to be needed for the challenging negotiations ahead, as the revenue requirements and economic drivers differ significantly between countries. Foreign Direct Investment (FDI) will likely be the most publicised sticking point, as it has been in the past, as it will disproportionately impact those countries that have relied on tax driven investment incentives. However, the alternative is “a race to the bottom”, to lower tax rates to attract investment. Economic growth is going to be critical if countries are going to meet their increasing expenditure requirements and it is encouraging to see this fact recognised in the OECD’s remarks.
“Whilst their timeline is ambitious, it is driven by necessity, in an effort to stop any additional countries implementing their own digital tax strategies. We have long asked for a unified approach, that offers businesses clarity and minimises reporting requirements across different markets, and look forward to seeing the end result.”
