1. Introduction

The OECD’s BEPS Action Item 1 Final Report (published in October 2015) recognizes that digitalization, and some of the business models facilitated by it, present important challenges for international taxation. It is also acknowledged in the interim report that in view of the pervasive nature of digitalization, it is at least difficult – if not impossible - to ring-fence for tax purposes the digital economy from the rest of the economy. As announced earlier, the OECD will present a final report in 2020, which is expected to provide a consensus-based solution for bridging various jurisdictions’ divergent positions in respect of taxation of incomes of the highly digitalized enterprises.

In March 2018, the OECD released a 218 pages long interim report outlining a number of areas where various jurisdictions hold divergent views, including on the need for future reform of the international tax system. The interim report aims to identify the points of divergence and lay down the groundwork for the next steps for articulating a solution for taxation in the digital economy. Also, that report reflects the recent work of the OECD’s Task Force on the Digital Economy (TFDE) and overall the progress since the publication of The BEPS Action Item 1 Final Report in 2015. 

 

The interim report begins with analysis of value creation across different digitalized business models. For that purpose, it focuses on the main characteristics of digital markets and the process of value creation. It also includes a few case studies. Thereafter, it describes the current progress in the implementation of the BEPS package relevant for the digital economy, and it provides an overview of recent relevant tax policy developments.

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