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TopicsTax and digital transformation

Digital transformation spurs innovation, generates efficiencies, and improves services while boosting more inclusive and sustainable growth and enhancing well-being. At the same time, the breadth and speed of this change introduces challenges in many policy areas, including taxation. Reforming the international tax system to address the tax challenges arising from the digitalisation of the economy, restore stability to the international tax framework and avoid the risk of further uncoordinated unilateral tax measures has therefore been a priority of the international community for several years. Other taxation work relating to the digital transformation includes VAT/GST, the taxation of virtual currencies and crypto-assets, as well as how tax administrations are employing a range of technological tools, data sources, and analytics to increase tax compliance.

Tax challenges arising from digitalisation

Addressing the tax challenges raised by digitalisation is currently the top priority for the OECD/G20 Inclusive Framework on BEPS, and has been a key area of focus of the BEPS Project since its inception. This work has delivered several important outputs covering both direct and indirect tax issues. In October 2020, the international community made substantial progress towards reaching a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy, and agreed to keep working towards an agreement by mid-2021.

 

Addressing the VAT challenges of digitalisation

In the area of Value-Added Taxes and Goods and Services Taxes (VAT/GST), digitalisation creates both BEPS risks and broader challenges. BEPS risks arise from highly digitalised businesses structuring their affairs to pay little or no VAT on remotely delivered services and intangibles, while the broader tax challenges were associated with the collection of VAT on cross-border supplies of goods, services and intangibles from online sales, particularly cross-border B2C sales.

Taxation of virtual currencies

Crypto-assets, and virtual currencies in particular, are in rapid development and tax policymakers are still at an early stage in considering their implications. So far, the tax policy and evasion implications have been largely unexplored, although forming an important aspect of the overall regulatory framework.

Prepared with the participation of over 50 jurisdictions, Taxing Virtual Currencies is the first comprehensive analysis of the approaches and policy gaps across the main tax types (income, consumption and property taxes) for such a large group of countries. The report also considers the tax implications of a number of emerging issues, including the growing interest in stablecoins and 'central bank digital currencies'; as well the evolution of the consensus mechanisms used to maintain blockchain networks and the dawn of decentralised finance.

Global tax reporting framework for digital platforms in the sharing and gig economy

A new global tax reporting framework, the Model Rules for Reporting by Platform Operators with Respect to Sellers in the Sharing and Gig Economy, requires digital platforms to collect information on the income realised by those offering accommodation, transport and personal services through platforms and to report the information to tax authorities.

With the digitalisation of the economy, transactions that take place on platforms may not always be reported to tax administrations, either by third parties or by the taxpayers themselves. The platform economy also means increased access to information for tax administrations, as it brings activities previously carried out in the informal cash economy onto digital platforms. The Model Rules are designed to help taxpayers in being compliant with their tax obligations, while ensuring a level-playing field with traditional businesses, in key sectors of the sharing and gig economy.

Digital transformation of tax administrations

The OECD Forum on Tax Administration (FTA), comprised of 53 leading global tax administrations, is working towards an ambitious agenda focused on tax certainty, enhanced tax co-operation and the collective challenges of digital transformation. The FTA supports policy makers in the development of new standardised reporting requirements to facilitate international exchange of information on those selling goods and services through the sharing and gig economy. They also set out in concrete and practical terms a digital vision for Tax Administration 2030 and to help reduce compliance burdens for small and medium sized enterprises through the use of new technologies.