Statement by the South Centre on the Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy
The South Centre takes note of the Statement by 136 member jurisdictions of the OECD/G20 Inclusive Framework (IF) made on 8 October 2021, on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The broad architecture of the agreement is now in place and it is clear to developing countries what they can expect from it.
Conference: International Taxation from Global South Perspectives
In Partnership with The Policy Center for the New South
Wednesday 13 October 2021 15h00 – 16h30 GMT+1 Live-Stream (YouTube, Facebook, Live Tweet)
The key questions that will be discussed in this event will be:
- What reforms are needed to international standards that can strengthen the capacity of governments to raise revenue from MNEs without discouraging economic activity?
- What is the cost of tax havens for developing countries and what role can international cooperation play in dealing with this issue?
- What might the future of tax reform look like in the post-COVID-19 era, given the growing digitalization of the economy?
Developing Country Demands for an Equitable Digital Tax Solution
By Abdul Muheet Chowdhary
The taxation of the digitalized economy is the foremost challenge in international taxation today. Countries around the world, especially developing countries, are struggling with taxing the rising profits of major tech giants which operate on entirely new business models that have made traditional international tax rules obsolete. A “Two Pillar solution” is being negotiated in the OECD/G20 Inclusive Framework on BEPS that seeks to update these rules, re-allocate taxing rights and establish a global minimum tax. However, as it stands, the solution has very limited tax revenue benefits for developing countries and is administratively complex. For the solution to be durable, it must be equitable, and accordingly must incorporate the concerns of developing countries going forward.