UK and International Tax news

OECD Responds To US Treasury Concerns Over Digital Services Taxation

Friday 13th December 2019

The OECD has responded to a letter from the US Treasury that expressed concern over digital services taxation.

The US Treasury Secretary has indicated that whilst the US supports discussions at the OECD to address the issues faced by the international tax system, it believes it is very important that these talks reach agreement in order to prevent the proliferation of unilateral measures.

The US Treasury Secretary went on to state that the US firmly opposes digital services taxes because they have a discriminatory impact on US based businesses and are inconsistent with the architecture of current international tax rules which seek to tax net income rather than revenues. In particular, potential mandatory departures from arm’s length transfer pricing and taxable nexus standards raise serious concerns although these might be addressed by making Pillar 1 a safe harbour regime and a GILTI-like Pillar 2 solution could be supportable.

The OECD’s Secretary General response includes an acknowledgement that the OECD shares the US sense that a global solution is needed to stop a proliferation of unilateral measures and to enable a return to a stable international tax system that avoids double taxation and taxes net rather than gross income.

The Secretary General added that “throughout the extensive consultation process, we had so far not come across the notion that Pillar 1 could be a safe-harbour regime and we raise this concern as it may impact the ability of the 135 countries, that are now participating in this process, to move forward within the tight deadlines we established collectively in the Inclusive Forum”.

The US Treasury Secretary has been invited to Paris to discuss the matter in more detail.


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