About the Digital Tax Log

Over the past several years, countries around the world have been engaged in consensus-building on various measures to counter base erosion and profit shifting (BEPS), coming to substantial agreement on a series of action items save one: the tax challenges arising from the digitalization of the economy. This highly contested issue area initially failed to garner policy agreement in the first round of negotiation on BEPS but it rose quickly to the top of the agenda over the past year as countries began considering, adopting and implementing various forms of so-called “digital services taxes” (DSTs). A slow trickle at first, these unilateral measures prodded the OECD and the Inclusive Framework to agree on a program of work to build consensus, and the OECD Secretariat constructed a multilateral solution in record time. Yet DSTs continued to proliferate to the point that the United States—which considers its companies the primary target of DSTs—is now investigating possible trade violations and announcing its intention to impose retaliatory tariffs [Read June 12 letter], even as it seeks to pause the OECD’s work on a consensus solution.


We therefore stand at a crossroads in international tax. One path leads to multilateral agreement, harmonization, and some degree of predictability for cross-border firms and their advisers. Another leads to a failure of multilateralism, a surge of unilateral regimes, a coordination nightmare that practitioners will no doubt struggle to navigate, and a possible tariff war to boot. It is not clear which path will prevail, but each step a country takes to adopt or block a measure ultimately moves the world closer to one outcome or the other, and the steps are coming thick and fast. It seems clear that return to the previous status quo is not an option.

The Canadian Tax Foundation is launching the Digital Tax Log to keep tabs on the rapid evolution of this area. The Digital Tax Log will feature a regular series of posts on the state of play of DSTs around the world, with commentary on the key features of proposed and adopted regimes, analysis of convergences and divergences across regimes, and notifications about relevant communications and legal challenges as they arise. The Digital Tax Log starts here with an overview of the landscape, comparing some of the key features of proposed and adopted DSTs and providing a visual depiction of the timeline of developments to date. Subsequent entries will track the trends as they develop through the end of the year, including any developments in continued U.S. trade-related scrutiny.

We hope that the Digital Tax Log will be of interest and use to the CTF membership as well as to the broader community of tax experts, policymakers, and policy observers around the world. To that end, we welcome comments and inquiries from our readers (please sign-in or create an account to comment below) and hope to engage in a dialogue about the nature and practical implications of this fascinating and fast-moving area of international tax.

 

Citation:
Allison Christians, CTF Digital Tax Log, Entry #1, 9 July 2020, at http://www.ctf.ca/CTFWEB/EN/Newsletters/Blogs_and_Reports/Digital_Services_Updates/Entries/Entry01.aspx

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