Australia discussion paper on Tax system and Digital Economy

Australia’s treasury, published an official Discussion Paper about the digital economy and the country corporate tax system on October 2018, opening a public consultation period running until November 30th, 2018.
The paper summarizes Australian corporate income tax system, and its connection to the international environment where multinationals operate, explains their country actions taken on this topic until today and regulations passed (MAAL, DPT, specific GST rules), and reflects about a number of points using mainly the OECD literature as a reference, with repeated citation of the UK position paper on the topic. Then, opens several questions to public stake-holders comment about:

• If taxing user participation value creation, about how to do it, and how to value it, incorporating the marketing intangibles element into the discussion (area of traditional focus of its Tax Administration even in the pre-highly digitalized business models).
• Allocation of taxing rights over residual profits associated to:
o User contributions to user countries
o Marketing intangibles to market countries
• PE/Nexus rules to be changed and how.
• Any justification for ring-fencing?.
• Any different change than Nexus and Profit Attribution rules to be made in international tax framework or local regs to address digitalization challenges?.
• What indicators are to be sued to identify businesses that benefit most from user-created value?.

DET3 comments
Not many novelty elements in the analysis but a good international discussion summary and challenges recollection. Influence of the UK position in the paper is strong.

Interesting nonetheless for what it implies is the purposed separation of digital users contribution from the marketing intangibles concept, and the summary differences between customers and users in the digital economy, something we have clearly highlighted in our October 17th paper prepared for the OECD public consultation (user does not mean client part).

When talking about intermediation platforms and interim period potential taxation, there are indications about local Treasury feeling more comfortable taxing just the cases where both consumers and suppliers are located in Australia, which defers from the EU and some other unilateral countries Directives/regulations drafts.

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