9 October 2019 OECD's Secretariat Proposal for a “Unified Approach” under Pillar One of the Work Programme on digitalisation of the economy
On 9 October, the Secretariat of the Organisation for Economic Co-operation and Development (OECD) published Secretariat Proposal for a “Unified Approach” under Pillar One (the “Pillar 1 Unified Approach”) that, if ultimately agreed, would fundamentally alter the international tax regime. The Pillar 1 Unified Approach represents an effort by the OECD to bring together three proposals for consideration by the 134 countries of the OECD Inclusive Framework under the OECD/G20 “tax challenges of the digitalisation of the economy” project. The proposal does not ringfence the so-called “digital economy” and instead seeks to allocate a greater share of taxing rights to the countries where consumers are located - regardless of a business’ physical presence there.
Together with proposals expected later this year on a global minimum tax coupled with the denial of deductions on “insufficiently taxed” payments, this would represent the biggest change in the international tax regime since the 1920s, should the Inclusive Framework countries agree to the Secretariat’s proposals. The proposal would impact a large number of “consumer facing” businesses; not just “tech” or online platform businesses.