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Rethinking the tax system

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Multinationals across all sectors should be ready as fundamental changes to the international taxation system make their way into reality. Alison Lobb, Robert Stack and Paul Riley introduce this special report.

The BEPS Action Plan was approved by the G20 in July 2013. Action 1 dealt with the tax challenges of the digital economy and established the Task Force on the Digital Economy (TFDE) to consider these challenges and, if possible, recommend solutions.

The report on Action 1, issued in autumn 2015, covered a variety of important areas related to the taxation of the digital economy. For example, the 2015 report acknowledged that the digital economy creates challenges for VAT collection, particularly when goods, services and intangibles are acquired by private consumers from suppliers abroad. It recommended actions that countries could take to improve VAT collection in those areas.

With respect to direct taxation, however, the 2015 report's perhaps most significant observation was that "because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ringfence the digital economy from the rest of the economy for tax purposes". Due in part to this reality, the 2015 report made no specific recommendations regarding direct taxation, but noted that it would be important to continue working on these issues and to monitor developments over time, promising a report in 2020 that would reflect this continued work.

The political pressure to deal with the perceived issues around taxation of the digital economy did not let up, however. In March of 2017, the G20 Communique from the Baden Baden meeting of the G20 finance ministers and central bank governors requested an interim report from the TFDE by spring 2018.

That interim report, which was followed by a G20/OECD/Inclusive Framework document in January 2019, and a related programme of work in May 2019 (mapped out in the Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy), laid the foundations for the work that this publication will explore and discuss in the following articles.

Importantly, as we describe more fully in these articles, the programme of work has the potential to change international tax rules for all multinational enterprises (MNEs), not just those that might be considered as 'digital', and not just the digital aspects of traditional businesses.

The changes under consideration would abandon the arm's-length principle to add more of a multinational's profits to the jurisdictions in which it does business. In doing so, the changes would fundamentally alter the existing permanent establishment rules, which typically require a multinational to have some sort of physical presence in a jurisdiction before that jurisdiction is able to tax it.

Finally, to ensure that MNEs pay a certain level of tax in all the countries in which they do business, policymakers are considering recommending that all countries adopt some form of minimum taxation regime, similar to the US global intangible low-taxed income (GILTI) regime, which was enacted as part of the 2017 tax reform legislation.

In the pages that follow, we provide more detail about the programme of work generally. We then focus on six specific industries to examine how these changes to the international landscape might impact those industries.

We hope you find our publication interesting and, more importantly, of practical use. We invite you to contact our leading team of professionals or your local Deloitte contact if you have any questions.

Alison Lobb



Deloitte UK

T: +44 20 7007 0497

Alison Lobb is a partner in London who specialises in transfer pricing, tax policy and international tax. Her work includes leading on Deloitte TP input to OECD and UK government consultations on international tax matters, including the G20/OECD BEPS project.

Alison has multinational clients quoted on the London and New York stock exchanges across all business sectors. As well as TP analysis, documentation, audits and advance pricing agreements (APA), Alison covers all areas of international taxation and business models, such as questions of: residence; permanent establishment; withholding tax; diverted profits tax; EU Directives; and BEPS initiatives.

Bob Stack


Managing director

Deloitte Tax LLP

T: +1 202 220 2100

Bob Stack has more than 26 years of experience advising US companies and individuals on a full range of international tax issues. He collaborates with Deloitte's global member firms on international tax developments and initiatives, including those from the OECD.

Prior to joining Deloitte, he was the deputy assistant secretary for international tax affairs in the Office of Tax Policy at the US Department of the Treasury, where he worked directly with the assistant secretary of tax policy and the international tax counsel in developing and implementing all aspects of US international tax policy, including treaties, regulations and legislative proposals.

Bob was the official representative of the Obama administration for international tax policy and represented the US government at the OECD, where he was involved in all aspects of the BEPS initiative.

Paul Riley


Senior partner

Deloitte Australia

T: +61 3 9671 7850

Paul Riley is the leader of Deloitte's global transfer pricing practice and a senior transfer pricing partner in Deloitte Australia's tax and legal practice. He has more than 33 years of experience, including 10 years with the Australian Taxation Office (ATO) and 23 years serving clients throughout Australia, the Asia-Pacific region and the US. Paul spent two years with Deloitte's global TP team in its Los Angeles office, working with US multinationals on a variety of TP assignments.

Paul has held many senior positions during his 20-year career at Deloitte, including managing partner of Deloitte Australia tax and legal (2012-2015), Victoria tax and legal leader (2011), and Deloitte Asia-Pacific transfer pricing leader (2009-2012). Paul was appointed leader of the global transfer pricing practice effective January 2017. In his global role, Paul is responsible for overseeing Deloitte's global TP strategy.

Paul has extensive experience in dealing with various revenue authorities (particularly the ATO), has settled many TP disputes, and has assisted clients achieve certainty through bilateral advance pricing arrangements (BAPAs). Paul is also involved in regular discussions with revenue authorities, instructing them on global trends that impact TP and providing prevention mechanisms to help mitigate the time and cost of disputes for global organisations.

© 2019. For information, contact Deloitte Touche Tohmatsu Limited.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the ‘Deloitte network’) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

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