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The integration of national economies and markets has increased substantially in recent years, putting a strain on the international tax rules, which were designed more than a century ago. Weaknesses in the current rules create opportunities for base erosion and profit shifting (BEPS), requiring bold moves by policy makers to restore confidence in the system and ensure that profits are taxed where economic activities take place and value is created.
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This chapter provides an overview of the impact of digitalisation on society and the global economy, including its role in fostering innovation. It outlines the history of work relating to the tax issues arising from digitalisation, including the 2015 BEPS Action 1 Report as well as the work undertaken since then by the more than 110 members of the OECD/G20 Inclusive Framework on BEPS.
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This chapter considers the impact of digitalisation on business models and value creation. It describes the main features of digital markets and how these shape value creation, looking in particular at more highly digitalised business models. Three characteristics that are frequently observed in certain highly digitalised business models are identified.
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This chapter concerns the implementation and impact of the package of BEPS measures released in October 2015. It focuses specifically on those BEPS Actions that are most relevant to digitalisation, and considers the impact of those measures to date in addressing BEPS concerns, as well as the broader tax challenges that go beyond BEPS that were identified in the 2015 BEPS Action 1 Report.
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This chapter outlines the unilateral measures that have been introduced by countries and that are potentially relevant to digitalisation. These types of measures are grouped into four categories and a detailed description of each measure is provided, as well as a description of their common features.
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This chapter considers the implications of the changes arising from digitalisation for the international tax system, in particular, with respect to the existing profit allocation and nexus rules. It identifies the different views held by members of the Inclusive Framework on BEPS on the question of whether and to what extent the changes arising from digitalisation should result in changes to the international tax rules. This chapter also describes the next steps to take forward the work of the Inclusive Framework towards a consensus-based solution by 2020.
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This chapter notes that there is no consensus on either the merit or need for interim measures with a number of countries opposed to such measures on the basis that they give rise to risks and adverse consequences irrespective of their design. Other countries acknowledge these challenges, but consider that they do not outweigh the need to implement interim measures and consider that at least some of the possible adverse consequences can be mitigated through the design of the measure. Countries in favour of the introduction of interim measures have set out guidance on the design considerations that need to be taken into account when considering the introduction of such measures.
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This chapter considers how digitalisation is affecting the tax system beyond the international tax rules. It identifies opportunities and risks for tax policymakers and tax administrations, and sets out areas where further work will assist governments, including in developing countries, to leverage the latest technological developments.
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