Taxing the Digital Economy – The OECD Secretariat’s New Transfer Pricing A-B-C and Alternative Courses of Action

On October 9 the OECD Secretariat published its “Proposal for a Unified Approach” (UA) which considered to deliver the answer to the tax challenges raised by the digitalization of the economy. This article starts with the problems (still) encountered after the OECD BEPS project and converts them into the objectives: effectiveness, neutrality, efficiency, resilience and flexibility. These objectives broadly coincide with the objectives developed under the 1998 Ottawa framework. Subsequently the UA is evaluated against these objectives with the interim conclusion that the combination of two tax regimes will probably not meet these objectives but may rather be a “quick fix” for a very high price. Subsequently two approaches are developed based on either a kind of Amount A type of approach or an Amount B/C type of approach. In the authors' view, the approaches developed in this article have the potential of meeting the objectives determined at the beginning. Especially a kind of Amount A type of approach could be a long term and sustainable solution. Under this approach, digitalization would be a chance rather than a challenge. Therefore, the pivotal step that should in the author's view be achieved by the beginning of 2020 would be to reach general political agreement and a clear statement on the objectives and the approach that will be taken to meet them as well as a clear step by step plan with fixed and tangible milestones for arriving at the desired outcome