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BEPS Inclusive Framework States Agree Digital Tax Roadmap

Wednesday, June 5, 2019

The 129 member states party to the OECD's Inclusive Framework on Base Erosion and Profit Shifting has agreed a work program on how to achieve a new global agreement for taxing multinational enterprises, by resolving the tax challenges from the digitalization of the economy.

It was approved during the May 28-29 plenary meeting of the Inclusive Framework, which brought together 289 delegates from 99 member countries and jurisdictions and 10 observer organizations.

The document commits states to intensifying international discussions around two main pillars. Drawing on analysis from a January 2019 Policy Note and informed by a public consultation held in March 2019, the work program will explore the technical issues to be resolved – first, on potential solutions for determining where tax should be paid and on what basis ("nexus"), and on what portion of profits could or should be taxed in the jurisdictions where clients or users are located ("profit allocation"). Second, states and the OECD will explore the design of a system to ensure that multinational enterprises, in the digital economy and beyond, pay a minimum level of tax.

In 2015 the OECD estimated revenue losses from BEPS of up to USD240bn, equivalent to 10 percent of global corporate tax revenues, and created the Inclusive Forum to coordinate international measures to fight BEPS and improve the international tax rules.

"Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalization of the economy," OECD Secretary-General Angel Gurria said. "Today's broad agreement on the technical roadmap must be followed by strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it."

The Inclusive Framework agreed that the technical work must be complemented by an impact assessment of how the proposals will affect government revenue, growth, and investment.