- The Digital Cooperation Organization (DCO) launches whitepaper discussing current proposals for global tax solutions for digital economy, initiates discussions with international tax community
Riyadh, July 26, 2022 – The Digital Cooperation Organization (DCO), the global organization dedicated to enabling digital prosperity for all, has released a new whitepaper that is intended to encourage dialogue and debate around international taxation proposals for the digital economy.
The digital economy has changed the way many businesses operate, but the mobility of digital businesses makes it difficult to ensure that taxation is aligned with the location where economic activities take place. According to EU estimates, companies with digital business models pay on average half the effective tax rate of companies with traditional business models.[i] This can mean that some nations miss out on tax revenues that would normally be generated in their country.
There are currently two main proposals to address the issues of digital taxation, the OECD’s BEPS 2.0, and a second proposal from the UN Tax Committee. The DCO, in its role to support its member states and promote the digital economy as a means to sustainable economic growth, has now published a whitepaper that reviews the two main proposals to address the issue of digital taxation, and proposes further dialogue on the issue.
DCO Secretary-General Deemah AlYahya commented: “The digital economy has created a fast-moving, dynamic and borderless business environment That has brought with it global economic challenges such as the issue of having a taxation model that ensures transparency, fairness and long term sustainable economic growth to nations including developing and under-developing nations. The DCO welcomes the attempts of the OECD and UN to develop such digital taxation model, however we believe that there is room for broader multilateral conversations amongst the stakeholders, along with in-depth studies that can help the international community to develop a taxation model that will promote and enable prosperity to all nations. We believe that a coordinated global approach to taxing the digital economy will incentivize foreign direct investments, and subsequently achieve economic recovery and poverty reduction.”
Manel Bondi, Digital Taxation Director, at DCO, and the author of the whitepaper, explained that while both current proposals have their merits, there have been issues raised by some low-and medium-income countries and the international tax community: “For the OECD Inclusive Framework (IF), the work done so far is a major and remarkable step towards reframing the international tax regime. However, certain IF members, notably low-and medium-income countries (LMICs), expressed deep concerns about what they consider as ‘inequities embedded in the deal’”.
“Regarding the UN proposal, it is seen by a large number of IF members, developing countries, as a serious alternative to OECD, being more adapted to their capacities, and better serving their interests… and this position is strengthened by the support of the IMF[ii] and the World Bank[iii] of the UN proposal from a developing country perspective. DCO’s primary recommendation for both working groups is to open the debate to all stakeholders, for transparent discussions towards a global consensus,” she added.
To further the dialogue around global digital taxation, the DCO is engaging with the international tax community, DCO member states and other stakeholders, beginning with a webinar to discuss the issues covered in the whitepaper and more. For more details visit the link here: https://www.dcoinsights.com/digitaltaxation/
The DCO is a global non-profit organization which is focused on digital economy initiatives that create knowledge sharing and collaboration between member states to accelerate digital transformation for the benefit of all. DCO has also launched several initiatives that support youth, startup entrepreneurs and women, to help underrepresented groups to access the positive benefits of the digital economy. At present DCO represents ten member states with a combined GDP of over US$2 trillion and population of nearly 600 million. With 70 percent of future economic growth set to be digital, DCO member states provide a valuable market opportunity to investors and entrepreneurs alike.