Digitalization is not only changing the way businesses operate, it is shaping the tax landscape itself. New tax requirements seek to ensure that tax is collected where consumers are based but Pillar 2 of BEPS 2.0 goes beyond the sole taxation of digital economy, driving international tax changes across all sectors.
Emilien Lebas: Digital taxation and big technology companies remain in the spotlight of global tax policy discussions. But make no mistake, what may have started focused on the so-called GAFAs and the taxation of the digital economy has evolved to be much more.
While several countries moved ahead with unilateral measures, the EU and the OECD continue to work on a coordinated approach.
At OECD level, discussions remain on-going on BEPS 2.0. The latest update was the issuance in October last year of the Blueprints for Pillars 1 and 2 and a still ambitious target of reaching a consensus on those by mid-2021.
In broad terms, Pillar 1 aims to introduce profound changes to profit allocation thereby reshaping transfer pricing, whereas Pillar 2 seeks to cover any perceived gaps remaining after BEPS, by discouraging structuring around low tax jurisdictions and setting-up a global minimum taxation. Combined, they would significantly change how companies think about their tax strategy across all industries.
At EU level, previous attempts to setup a digital tax failed some years ago in favor of a more globally coordinated solution. However, this did not mark the end of these discussions within the EU. Recently, the EU Commission came up with new proposed measures which may deviate from the OECD’s BEPS 2.0 to re-focus the discussion back on Big technology companies.
At this stage, we can only speculate on how this proposition will progress and how it will interact with BEPS 2.0, but one thing is certain. The tax landscape is changing again for all sectors, and taxpayers should keep a close watch on the ongoing discussions to be ready when the inevitable reform kicks-in.
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BEPS 2.0… towards a global minimum taxation?