Global tax shake-up proposed by OECD

Plans from the Organisation for Economic Co-operation and Development (OECD) would force large and highly profitable multinational enterprises including digital companies to pay tax wherever they have significant consumer-facing activities and generate profits.

In a consultation document the OECD said: ‘In a digital age the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence. The current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalised world.’

The proposed unified approach brings together common elements of three competing proposals from member countries and is based on the work of the OECD/G20 inclusive framework on base erosion and profit shifting.

Some profits and corresponding taxing rights would be reallocated to countries and jurisdictions where multinationals have their markets. It would ensure that companies conducting significant business in places where they do...