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Australia: Discussion paper, taxing the digital economy

Australia: Discussion paper, taxing the digital economy

A discussion paper released by the Australian Treasury considers whether and how the corporate tax rules might need to evolve to address digitalised business models.


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Treasury’s discussion paper The digital economy and Australia’s corporate tax system indicates that Australia’s tax revenue could be particularly at risk as a result of digitalisation, if corporate income taxes continue to be levied only based on where a business has a physical presence.  

Currently there is no consensus among Organisation for Economic Cooperative Development (OECD) member countries as to how the existing international tax framework could change. The most hotly debated matters include whether user networks in a particular country create value for a digital business which are then to be taxed in that country. Alternately, could a digital business’s user network in a country be deemed to create sufficient nexus between that country and the business, such that the business could have profits attributed to its digital presence rather than its physical presence?

Australia’s Treasury is considering interim options for taxing digital businesses which are interacting with Australian users and customers, until such time as multilateral measures are agreed upon. Following OECD guidance for countries considering the implementation of interim options, the Treasury paper highlights the need to consider which businesses benefit most from user interaction, avoiding over-taxation and complexity, while minimising impact on start-ups and small business.

Submissions on the discussion paper are due by 30 November 2018.

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