The Association of International Certified Professional Accountants Responds to the OECD's Proposal to Address the Tax Challenges of a Global, Digital Economy

Washington, D.C. (May 27, 2019) – The Association of International Certified Professional Accountants (the Association) has submitted comments and recommendations to the Organization for Economic Co-operation and Development’s (OECD) public consultation on how to address the taxation of a global, digital economy.

In its response, the Association recommended that “a consensus-based, equitable, and successfully durable rebalancing of multi-jurisdictional taxing rights must have four elements:”

• Any rules extending taxation nexus to businesses that lack a physical presence in a jurisdiction should be clear, measurable, predictable and applied consistently and neutrally across all industries and business models, and across all jurisdictions;

• The arm’s-length standard, which is based on economic reality, is flexible enough to accommodate many of the concerns raised and provides a basis for addressing these concerns. Exceptions should consist solely of rules that are specific and limited in scope for attributing profits and losses to a jurisdiction. It is vital that any such rules are clear and administrable in their application and give proper regard to all value creating activities and business investment that takes place in other jurisdictions;

• All participant Inclusive Framework jurisdictions must agree:

  • to adopt and fully implement the new consensus to ensure that all income is properly taxed only once across all applicable jurisdictions, and

  • to immediately repeal any previous unilateral actions, including temporarily enacted provisions related to digital services, whether currently in effect or pending; and

• All participant Inclusive Framework jurisdictions must include compulsory effective and practical mechanisms in their treaties and other bilateral agreements to resolve any controversy over taxing rights, such as mandatory binding arbitration, as a minimum standard subject to peer review to ensure prompt resolution of any situations potentially resulting in double taxation.

The Association specifically cited five of its Principles of Good Tax Policy as the framework for its response: (1) equity and fairness to taxpayers; (2) certainty over the amount, timing and method of payment of a tax; (3) effective tax administration to both governments and taxpayers; (4) unimpeded or no reduction in economic growth and efficiency; and (5) enablement of appropriate government revenues.

Earlier this year, the Association provided the OECD with its Taxation of the Digitized Economy policy paper, which calls for “international coordination to develop a global solution to the taxation concerns raised by digital transactions and the general digitalization of the economy.”