While the international system has traditionally based taxation on where companies have a physical presence, digitalisation has allowed value creation and engagement of users far beyond that physical presence. According to the OECD, new technologies have facilitated tax avoidance through the shifting of profits by multinational enterprises (MNEs) to low or no tax jurisdictions.
Recognising this reality, the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework (IF) restarted its work on base erosion and profit shifting project in 2017 to address the tax challenges arising from the digitalisation of the global economy. The 140 participating governments are working now to finalise details of a Two-Pillar Approach: Pillar One would allocate new taxing rights to market jurisdictions based on certain companies’ profits and provide for the withdrawal of digital services taxes (DSTs), and Pillar Two would act as a global minimum tax on corporate profits. The implementation of multilateral outcomes holds particular importance for smaller businesses, including those that do business online.
The discussion will focus on the implications for the European Union and in particular European SMEs of the Inclusive Framework’s Two-Pillar Approach to addressing the tax challenges arising from the digitalisation of the global economy.
Paul Tang MEP and EIF Member
Benjamin Angel, Director of Direct taxation, Tax coordination, Economic analysis and Evaluation, DG TAXUD, European Commission
Gerhard Huemer, Director Economic & Fiscal Policy, SMEunited
Megan Funkhouser, Director of Policy, Tax and Trade, Information Technology Industry Council (ITI)
Mona Barake, Postdoctoral Researcher, EU Tax Observatory
Maria Rosa Gibellini, Director General, European Internet Forum