Ten of the most frequently made comments on the OECD’s latest digital tax consultation*

Mandatory and binding arbitration as well as enhanced dispute prevention measures must accompany any change to market nexus and profit allocation rules.

1. Any solution to market allocation of taxing rights should apply equally to losses.

2. Wait for implementation and full impact of BEPS actions and US tax reform.

3. Unilateral market taxation measures are a bad thing because they lead to distortions, compliance burdens, and double taxation.

4. There should be no ring-fencing, but on the other hand targeted rules tackle the ‘real problem’.

5. Any solution should be profit- rather than revenue-based because of over/double taxation, non-neutrality and administrative burden concerns.

6. Technology and related business models are rapidly changing so any solution based on ‘snap-shot’ concepts and definitions will not be sustainable.

7. Mechanical or formulaic solutions are inaccurate and unfair, but on the other hand ‘facts and circumstances’ approaches are too complex and administratively burdensome.

8. Applying the residual profit split method to allocate market taxing rights is unworkable.

9. The global inclusion and base eroding payments proposals infringe sovereign taxing rights, negate legitimate tax incentives and will need an unrealistically high degree of consensus to work.

For a more in depth synthesis and overview of the public comments, see my article OECD Weighing Extensive Input on Digital Economy in Tax Notes International, May 6, 2019.

*Addressing the Tax Challenges of the Digitalisation of the Economy, OECD, 2019. Public comments can be found here