James Ross and Sarah Gabbai consider the national and international responses to BEPS concerns arising from highly digitalised businesses
In its 2015 Final Report: Addressing the Tax Challenges of the Digital Economy (Action 1), the OECD identified three broad direct tax challenges associated with digitalisation. These are:
- how nexus is determined;
- how value is attributed to data and content generation; and
- how payments made in the context of digital business models should be properly characterised for tax purposes.
To address these challenges, Action 1 considered a nexus-based ‘significant economic presence’ rule, a withholding tax on digital transactions, and an equalisation levy. These are interim proposals with the ultimate aim of taxing remote online sales to customers in market jurisdictions.