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| 2 minutes read

Can we all agree on Digital Services Taxes?

Pillar 1 has long been stuttering and continues to stall.

Pascal Saint-Amans (the OECD's former head of tax and perhaps its most notable champion) offered a pre-recorded interview shared during a conference held in Brussels yesterday by CFE Tax Advisers Europe. 

During it, he expressed doubts over the likelihood of ratification of Pillar 1 by the end of June deadline the OECD have previously set.  Whilst he also commented on the possibility of a model DST being negotiated at the United Nations in the event of Pillar 1 ultimately not materialising, he cautioned of the likelihood that the countries “where the digital companies are located won’t want to sign it” (and likely the reason why Pillar 1 may itself fail).

The danger of such failures (of Pillar /a UN model DST) and the lack of a multilateral accord with respect to digital taxes is that we will predictably return to unilateral measures being taken by various countries.   A number have been pressing for DSTs for some time as a bid to seek to attribute taxable obligations (in the country of delivery of service/goods, as opposed to only in the jurisdiction where the company operates from/is headquartered) on certainly, at the very least, the largest digital companies.  In many cases (leveraging on the remote/digital aspects to their business) these companies have thus far been able to avoid drawing themselves into the tax nets of where their customers are receiving the service/goods by avoiding establishing a taxable presence there.  

If a consensus approach to DSTs isn't reached, it's likely that unilateralism shall reign, with twelve countries presently holding their proposed DST measures in abeyance whilst a multilateral solution is sought.   There are also up to 19 countries that have already expressed their desire to explore unilateral DSTs, and if multilateralism fails, this could rise considerably and potentially spark a trade war.

Pillar 1 remains stalled.  If a unified approach cannot spark into operation, the World economy may bear the stuttering consequences.

Ratification of an international treaty that would reallocate taxing rights over the profits of the world’s largest companies is “not the most likely scenario” despite its possibly being ready for signing in June, a former OECD tax chief said.

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