The Organization for Economic Co-operation and Development (OECD) has released a discussion draft on Action Item 1 (Tax Challenges of the Digital Economy) of the Action Plan on base erosion and profit shifting (BEPS).

The press release explains that BEPS Action 1 aims to identify the main difficulties that the digital economy poses for the application of existing international tax rules and develop detailed options to address these difficulties, with “a holistic approach” and considering both direct and indirect taxation.

Issues to be examined under BEPS Action 1 include, but are not limited to:

  •          The ability of a company to have a significant digital presence in the economy of another country without being liable to taxation due to the lack of nexus under current international rules;
  •          The attribution of value created from the generation of marketable location-relevant data through the use of digital products and services;
  •          The characterization of income derived from new business models;
  •          The application of related source rules; and
  •          How to maintain the effective collection of indirect taxes (e.g., VAT and GST) with respect to the cross-border supply of digital goods and services.