OECD publishes blueprints on the tax challenges arising from the digitalisation of the economy

Deloitte Malta Tax Alert

12 October 2020

On 12 October, the Organisations for Economic Co-operation and Development (the ‘OECD’) released an update on the current international tax negotiations to reach a multilateral, consensus-based solution to the tax challenges arising from the digitalisation of the economy.

During the presentation of the update, the OECD published two reports on the OECD’s two-pillar solution to the tax challenges facing the world economy (the ‘Blueprint Reports’). The Blueprint Reports will be subject to a public consultation period spanning from 12 October 2020 to 14 December 2020 and interested parties are invited to send their written comments on a series of questions set out in a public consultation document by no later than 14 December 2020. This period shall be followed by consultation meetings to be held virtually in mid-January 2021.

The Blueprint Reports represent the results of work undertaken by the OECD and the Inclusive Framework on BEPS to date on two pillars identified in the Programme of Work document published by the OECD in May 2019:

Pillar One focuses on the re-allocation of taxing rights with the intention of:

  • addressing the question of taxable presence without physical presence;
  • determining where tax should be paid and on which basis; and
  • determining which portion of profits should be taxed in consumer/user jurisdictions.

Pillar Two focuses on a global anti-base erosion mechanism with the intention of:

  • reducing instances of shifting of profits to low or no tax jurisdictions;
  • ensuring that a minimum level of tax is paid by multinational enterprises;
  • striving to level the playing field between traditional and digital companies.

The update was presented by OECD Secretary-General Angel Gurria and OECD director of the Centre for Tax Policy and Administration Pascal Saint-Amans.

The Blueprints Reports may be accessed here (Pillar One and Pillar Two)

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