In brief - International tax update

Tax Watch: Edition 1, 2014

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OECD Discussion Draft – Tax Challenges of the Digital Economy

On 24 March 2014 the OECD released a discussion draft for public comment on Action 1 under the Action Plan on Base Erosion and Profit Shifting which was published in July 2013.

Action 1 focusses on the Tax Challenges of the Digital Economy and the discussion draft invites public comment on the main difficulties the OECD Action Plan has identified as arising out of the digital economy which it sees as impinging the application of existing international tax rules.

The issues to be considered under this Action include:

  • the ability of a company to have a significant digital presence in the economy of another country without being liable to taxation;
  • the attribution of value created from the generation of location-relevant data which is marketable through the use of digital products and services;
  • the characterization of income derived from new business models;
  • the application of sourcing rules; and
  • how to ensure the effective collection of VAT/GST on international supplies of digital goods and services.

Comments on the discussion draft were due by 14 April 2014 with a public consultation meeting was held on 23 April 2014.