Are the European member states and companies ready for the measures of BEPS 2.0? How will this affect the global tax landscape and companies’ tax strategies?
Digital transformation is all around us creating sustainable growth and enhanced well-being. Traditional domestic and international taxation rules are not designed and fit to deal with the digital economy.
The current BEPS 2.0 initiative introduces measures to ensure a global minimum level of taxation and focuses specifically on introducing new concepts and rules to address the tax challenges of the digitalization of the economy and grant new taxing rights to the countries where users of highly digitalized business models are located.
The impact of the digital economy on taxation
After the financial crisis of 2008-2009 and multiple international revelations about tax evasion and aggressive tax planning, the G20 countries, together with the OECD, decided to take the necessary measures against erosion of the tax base (Base Erosion) and profit shifting. This resulted in the BEPS 1.0 action plans, published in 2015.
While the BEPS 1.0 initiatives have led to many changes to the international tax rules to limit profit shifting, authorities believed that it did not yet adequately address the challenges of the digitalization of the economy. Many countries have started in recent years to impose unilateral tax measures to tax digital companies. Some countries issued new legislation to tax companies who are active in a jurisdiction via online platforms, online sales, etc. or via other means with the introduction of a digital service tax.
The purpose of this new OECD project is to consolidate these types of unilateral efforts into a consensus position to help avoid misaligned unilateral efforts and double taxation.