Will a Global Deal on Digital Taxes Help Latin America?
A long-debated blueprint from the Organization for Economic Cooperation and Development, or OECD, to standardize legislation regarding global digital taxation will be pushed back until October because of coronavirus-related complications, Secretary General Ángel Gurría said in May. The organization had originally aimed to present the framework in July, but it now hopes it will be approved by participant countries in a meeting scheduled for November. What does the blueprint consist of, and will it be ready by the end of the year? How significant is the need for consensus on a standardized set of international tax rules for the digital economy, particularly at a time when digital services are taking on even bigger roles due to the Covid-19 pandemic? What would the framework mean for countries in Latin America and the Caribbean, especially in terms of tax revenue?
Ubaldo González de Frutos, lead specialist on tax administration at the Inter-American Development Bank: “The significance of corporate income tax in Latin America and the Caribbean (15.4 percent of revenues) is much higher than in OECD countries (9 percent). It is therefore extremely important to protect the tax base and ensure a fair and balanced allocation of taxing rights, particularly at a time when countries are suffering fiscal imbalances due to the Covid-19 and the commodities crisis. The OECD blueprint provides hope in two senses: it assigns part of the tax base of digital multinational enterprises (MNEs) to market jurisdictions; and by imposing an anti-BEPS (base erosion and profit shifting) tax, the GloBE, it curbs wasteful tax incentives by developing countries. Additionally…”Read More
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