Digitalisation of the economy: overhauling international corporate tax

04/11/19

The Organisation for Economic Co-operation and Development (OECD), together with a group of more than 130 countries, are working on rewriting the rules of the international corporate income tax system.

The changes are far more fundamental than BEPS, and are probably the most significant tax changes in the last 60 years. The proliferation of unilateral measures targeting interaction between “users” and businesses (e.g., Digital Services Taxes) has heightened the urgency among policymakers to reach agreement on these fundamental multilateral reforms. There is a desire from many large countries (and a commitment from the G20) to reach agreement swiftly.

Taxpayers will want to analyse the potential impact on their businesses. Taxpayers may also want to make their views known to the OECD and national governments as the project moves forward in an effort to achieve a stable and sustainable consensus agreement.

The critical elements of the current proposals are:

  • Allocating more taxable income to where customers, end consumers, or users of digital platforms are located, regardless of whether the business currently has a taxable presence in those countries; and .
  • Common rules to ensure minimum taxes are paid on all income, through “top up” taxes in parent companies, or denial of tax deductions / treaty benefits.

See more detail on the OECD’s latest proposals by following this link.

Are you prepared for the changes?

There will be significant implications across business areas that organisations need to start preparing for now.

Are you measuring the possible impact on the ETR? How sensitive are these changes to areas still under discussion at the OECD?

Will your current group structure still be appropriate? Will changes erode current benefits? Will it make it difficult to comply with new rules?

Are you prepared for the increase in compliance obligations, costs and the need for associated resource and support (e.g., ERPs)?

Have you considered the increase on cost of capital with potential impacts on valuations, diligence and accounting?

Are you communicating with your stakeholders to raise awareness of the impacts and resource requirements?

How can we help?

Preparing for these changes will require a proactive approach, co-ordinating stakeholders from across tax teams and the C-Suite to raise awareness of any implications and minimise risk to business objectives. Our highly experienced interdisciplinary team understand the technical and political issues surrounding the discussions on the overhaul of the corporate tax system. We can help you prepare with our integrated approach.

Technical expertise

We use our professional and technical expertise and insight to explain what the changes could mean for your business.

Impact assessment

We can help you assess the concrete impact of the reform with two straightforward and simple tools to build a strong foundation for your preparation planning.

Stakeholder communications

We work with clients to develop an interaction plan with both their stakeholders to respond proactively to changes and developments.

Contact us

Charlotte Richardson

Partner, PwC United Kingdom

Tel: +44 (0)7793 580784

Giorgia Maffini

Transfer Pricing, United Kingdom

Philip Greenfield

Global Tax Policy, PwC United Kingdom

Tel: +44 797 341 4521

David Murray

Director, PwC United Kingdom

Aamer Rafiq

Global Financial Services Transfer Pricing Leader

Tel: +44 (20) 7212 8830

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