On 31 January the OECD released a statement by the Inclusive Framework - the ever growing collection of countries, which at the latest count stood at 137 countries, working towards a long-term solution to the tax challenges of digitalisation - reaffirming their commitment to reach a consensus-based solution by the end of 2020.
These proposals will see a change in the current rules which allocate taxing rights between jurisdictions to take account of digitalisation. This has the potential to be accompanied by a significant additional compliance burden for business if it requires additional local tax filings, payment of tax etc in new jurisdictions.
With the multilateral nature of the proposal also comes the increased likelihood of tax disputes spanning multiple jurisdictions, without a centralised process for resolving such disputes this is likely to lead to lengthy disputes and an increased risk of businesses paying tax on the same profits in multiple jurisdictions.
Inclusion of centralised administration (via a ‘One Stop Shop’) within the final package would reduce the risk of compliance burdens for business increasing as a result of the reform and play a key role in preventing and speeding up the resolution of those disputes spanning multiple countries that do arise.
The CBI has been advocating for centralised administration (via a One Stop Shop) to be part and parcel of any reform to the international tax framework - recognition of this and a commitment to explore solutions based on centralised administration by the OECD Inclusive Framework is an important step forward to ensure that reform is met with simplicity and certainty for business.