The OECD on 29 January presented 4 different proposals on how countries could overhaul their corporate tax rules to effectively tax digital economy. Seen as part of a much wider policy move to continue tackling Base Erosion and Profit Shifting, the OECD hopes that revisions to corporate tax regime, would limit the opportunities for companies to shift profits from high to low tax jurisdictions.
The proposals are supported by large market economies of the US, China, Brazil and India. 127 countries, members of the inclusive framework have agreed to work together to undertake a revision of corporate tax rules by 2020.
The proposals call for a minimum corporate tax to be imposed by all countries. This would mean the end of 0% tax rate offered in low tax /offshore jurisdictions.
Of particular interest to the multinationals is the push by France and Germany to devise rules that will enable them to tax
income in jurisdictions with little or no tax. Such a move would likely elicit a slew of new tax anti-avoidance legislation. It is expected that the changes envisaged would not only affect the “digital multinationals” , but other multinationals as well.
