Fighting fiscal injustice: the work of the OECD on taxation of digital economy
- Author(s):
- Parliamentary Assembly
- Origin
- Assembly
debate on 20 April 2021 (11th sitting) (see Doc. 15251, report of the Committee on Political Affairs and Democracy,
rapporteur: Mr Georgios Katrougkalos; and Doc. 15266, opinion of the Committee on Social Affairs, Health and
Sustainable Development, rapporteur: Ms Selin Sayek Böke). Text adopted by the Assembly on
20 April 2021 (11th sitting).
1. The Parliamentary Assembly of the
Council of Europe, enlarged to include the delegations of national parliaments
of the Organisation for Economic Co-operation and Development (OECD)
member States that are not members of the Council of Europe and
a delegation from the European Parliament, underlines that the ability
of governments to raise funds through taxation, which is necessary
for the funding of public services, is a fundamental anchor for
democracy and social justice. The enlarged Assembly welcomes the
signing of an updated co-operation agreement (memorandum of understanding)
between the Council of Europe and the OECD in December 2020, which
confirms both organisations’ interest in promoting shared values
and objectives, inter alia in
relation to sustainable development and tax matters.
2. The digitisation of the economy and the rise of technology
giants (including Google, Amazon, Facebook and Apple (GAFA)); the
aggressive tax planning, tax avoidance and artificial profit-shifting
practices adopted by numerous multinational corporations; the general
public’s increased awareness of these practices and the worsening
state of public finances caused by the 2008 global economic crisis
and the Covid‑19 pandemic have made the need for internationally
co-ordinated policy responses more urgent than ever before.
3. While much of the value in the digital economy is created
through virtual and stateless platforms, the enlarged Assembly considers
that it is necessary for States to be provided once again with a
broader tax base to cover their public financing needs, in particular
by moving away from the concept of “permanent establishment” that
underpins the traditional model for the distribution of the international
tax base.
4. The enlarged Assembly welcomes the OECD’s work on the Inclusive
Framework on Base Erosion and Profit Shifting (BEPS). It notes that
the first of the many actions in the framework concerns policy responses
to the tax challenges arising from the digital economy and endorses
the breakdown of the policy proposals into two pillars. Pillar 1
addresses the broader issues of taxation of the digital economy
and focuses on how taxing rights are determined (namely nexus rules)
and how taxable profits are allocated among jurisdictions. Pillar 2 tackles
the remaining BEPS issues related to tax planning through the establishment
of a global minimum tax.
5. It welcomes the OECD’s instrumental role in this context and
the progress made in the work on Pillar 1 and the adoption of a
joint statement outlining the general framework of the discussions
for the two pillars. It encourages the participating States to continue
this work with a view to a consensus-based agreement on both pillars.
6. The enlarged Assembly also supports the OECD’s work in promoting
global standards for collecting value added tax from online sales
of goods, services and digital products, including as regards international exchanges
through the platform economy. It furthermore welcomes the OECD’s
guidance on taxing virtual currencies and crypto-assets, aimed at
developing a new tax reporting framework by the end of 2021.
7. The enlarged Assembly stresses that multilateralism, provided
that it is genuinely inclusive, is the best means of achieving tangible
results. It considers that achieving consensus at international
level is the best way to reform the international tax system, to
restore stability to the international tax framework and to avoid
the risk of further unco-ordinated, unilateral tax measures which
could trigger trade sanctions.
8. To ensure fair taxation of global corporate profits, the enlarged
Assembly urges the OECD and member States to:
8.1 further support and promote the Inclusive Framework on
Base Erosion and Profit Shifting in order to reach a consensus-based
agreement comprising Pillars 1 and 2 within the envisaged timelines
and, if necessary, seal off the areas where a broad multilateral
consensus has been reached by concluding an interim agreement by
mid-2021;
8.2 facilitate the application of the agreed multilateral
instrument to existing tax treaties;
8.3 avoid and reverse a race to the bottom of national tax
systems, which could undermine governments’ legitimate financing
abilities in maintaining sound public finances and high-quality
social services for all;
8.4 implement rules on transparency and the automatic exchange
of information for tax purposes between all countries in order to
ensure tax fairness and compliance by both corporate entities and individuals
and push for public country-by-country reporting by enterprises;
8.5 develop mandatory disclosure rules regarding aggressive
or abusive transactions, arrangements or structures;
8.6 propose measures for countering harmful tax practices
more effectively, with a priority on improving transparency, including
compulsory spontaneous exchange of rulings relating to preferential regimes
(fiscal rulings) and on requiring substantial activity for granting
the status of preferential regime;
8.7 promote international coherence in corporate profit taxation,
so that the design of tax policy is better informed by the increasing
interconnectedness of economies and the gaps that can be created
by interactions between domestic tax laws;
8.8 do more to take account of the needs and interests of
developing countries in the design of a new post-BEPS international
tax system that is multilateral and at least as inclusive as the
proposed inclusive framework.
