Comments on Discussion Draft:Taxation of Software Payments as Royalties
South Centre Tax Initiative
The South Centre supports the proposal being discussed in the UN Committee of Experts on International Cooperation in Tax Matters (UN Tax Committee) to tax payments for computer software as royalties. This will help developing countries more effectively tax the digitalized economy and will bring clarity to the application of existing bilateral tax treaties.
This Semester Report summarizes the activities undertaken by the South Centre during the period 1st July to 31 December 2020. It is intended to provide information, organized by themes, about recent developments in the areas covered by the Centre’s Work Program, meetings organized or co-organized by the Centre to examine particular issues or provide analytical support for negotiations taking place in various international fora, and conferences and other meetings where the Centre has participated. It also informs about publications made.
Assessment of the Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalization of the Economy
An Outline of Positions Favourable to Developing Countries
Report by the South Centre Tax Initiative’s Developing Country Expert Group
Irene Ovonji-Odida, Veronica Grondona, Samuel Victor Makwe
This report is written primarily for developing country negotiators in the Inclusive Framework and accordingly contains a technical assessment of Pillars One and Two. The aim is to discuss the positions and principles which can inform the negotiations in developing countries’ best interests. However, it is also written for a larger audience, particularly diplomats involved in financing for development discussions and international trade rule making, so as to sensitise them to the nuances of the ongoing discussion on the taxation of the digitized economy. In the midst of the COVID-19 pandemic and a devastating economic downturn, it is more important than ever to ensure that developing countries obtain their due taxing rights. This report is an initial contribution in that direction.
The South Centre Tax Initiative (SCTI) submitted its comments on the Interim Report of the High Level Panel on Financial Accountability Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel). The Report analyzed the “gaps, vulnerabilities and impediments present in the current international systems related to financial accountability, transparency and integrity issues” and found that “international systems can help countries prevent the drain of resources from development, contributing to achieving the 2030 Agenda, but that they lack co-ordination, leave gaps and may overlap and even conflict with each other. The shortcomings are systemic and require systemic responses.”
Redistributing Taxing Rights to the Global South through the Digitalized Economy
By Carlos Protto
A historic discussion is underway within both the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) on redistributing taxing rights to the Global South through proposals on taxing the digitalized economy. An overview of the issues at stake is provided in this SouthViews by Carlos Protto, Member of the UN Committee of Experts on International Cooperation in Tax Matters and Argentina’s representative in the Steering Group of the OECD/Group of Twenty (G20) Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The text is based on his presentation at the international virtual seminar co-organized by the South Centre on “Equity in Global Tax Regimes and Implications for the SDGs” held on 7 October 2020. The recording is available here: https://www.youtube.com/watch?v=3wAESmfvRN4&ab_channel=uomlive.
Virtual training on Taxing the Hard to Tax: High Net Worth Individuals and Informal Sector
The South Centre Tax Initiative in collaboration with the West African Tax Administration Forum (WATAF) is organizing this virtual training on “Taxing the Hard to Tax: High Net Worth Individuals and Informal Sector”.
Comments on Discussion Draft: Possible Changes to the United Nations Model Double Taxation Convention Between Developed and Developing Countries Concerning Inclusion of software payments in the definition of royalties
The South Centre Tax Initiative (SCTI) offers its comments on the discussion draft on inclusion of software payments in the definition of royalties. As is well known, this is an important issue that developing countries have been fighting for, for a while now. The SCTI supports the proposed change which seeks to insert the phrase “computer software” in article 12(3) of the United Nations Model Double Taxation Convention Between Developed and Developing Countries. The COVID-19 pandemic adds special urgency to resolving this long-pending issue as revenue from software payments made from developing countries continues to increase.
International virtual seminar on Equity in Global Tax Regimes and Implications for the SDGs
The seminar is designed to be an introduction to two topics: (1) key issues faced by developing countries in international taxation (2) redistributing taxing rights to the Global South through the ongoing proposals on taxing the digitalized economy. The speakers will be two Members of the United Nations Committee of Experts on International Cooperation in Tax Matters. The seminar is organized in collaboration with The Sustainability Platform (TSP) Asia, the University of Mysore and the Indian Economic Association.
Base Erosion and Profit Shifting in the Extractive Industries
By Danish and Daniel Uribe
Developing countries with significant natural resources have not fully utilised them for financing their development aspirations. Extractive industries and the revenue generated from their extractive activities need to constitute a larger share of domestic resource mobilisation. However, the sector remains beset with massive tax base erosion and profit shifting by large multinational companies. This policy brief therefore looks at the extractive industries, and the potential impact of their practices on the national policies and regulations in developing countries. It further also considers some current initiatives at the international level for enabling countries to obtain more revenue from natural resource extraction, and offers some observations on the policy options available to developing countries.
South Centre Semester Report, 1 January to 30 June 2020
This Semester Report summarizes the activities undertaken by the South Centre during the period 1st January to 30 June 2020. It is intended to provide information, organized by themes, about recent developments in the areas covered by the Centre’s Work Program, meetings organized or co-organized by the Centre to examine particular issues or provide analytical support for negotiations taking place in various international fora, and conferences and other meetings where the Centre has participated. It also informs about publications made.
Mesures nationales sur l’imposition de l’économie numérique
ParVeronica Grondona, Abdul Muheet Chowdhary, Daniel Uribe
Le Cadre inclusif sur le BEPS de l’Organisation de coopération et de développement économiques (OCDE) envisage une approche fondée sur deux piliers en matière de taxation de l’économie numérique. Les premières estimations concernant l’impact de ses recommandations montrent une modeste augmentation de la collecte de l’impôt sur les sociétés, dont les bénéfices devraient revenir principalement aux pays développés. Dans le même temps, les mesures nationales de taxation de l’économie numérique se multiplient, en conséquence de la pandémie de COVID-19. Le droit international reconnaît pleinement ce droit aux pays, bien que cette approche soit considérée comme une forme d’unilatéralisme. Ce document de recherche met en lumière les mesures de fiscalité directe prises par différents pays et présente les trois approches clés retenues pour taxer l’économie numérique : (1) l’imposition de taxes sur les services numériques ; (2) l’élaboration de règles permettant d’établir un lien fiscal pour les entreprises numériques qui opère par l’intermédiaire d’une présence numérique significative ; (3) des retenues à la source sur les transactions numériques.
Medidas Tributarias Nacionales sobre la Economia Digital
Por Veronica Grondona, Abdul Muheet Chowdhary, Daniel Uribe
El Marco Inclusivo de la Organización de Cooperación y Desarrollo Económicos (OCDE) está considerando un enfoque de dos pilares en relación con el cobro de impuestos sobre la economía digital. Las estimaciones preliminares acerca de la repercusión de sus recomendaciones indican un modesto incremento en la recaudación de impuestos sobre la renta de las sociedades, cuyos beneficios se prevén que se dirijan principalmente a los países desarrollados. Al mismo tiempo, están proliferando las medidas nacionales en materia de cobro de impuestos sobre la economía digital, un cambio estimulado por el comienzo de la pandemia de COVID-19. Los países también tienen plenos derechos a aplicarlas en virtud del derecho internacional, pese a las etiquetas de “unilateralismo”. En este documento de investigación se ponen de relieve las medidas en materia de impuestos directos que están adoptando diversos países y se exponen tres enfoques fundamentales con respecto al cobro de impuestos sobre la economía digital: 1) impuestos sobre los servicios digitales; 2) normas sobre un nexo en base a una presencia digital significativa; y 3) retenciones en origen sobre las transacciones digitales.