Professionals in the member firms of KPMG International1  (“KPMG”) welcome the opportunity to comment on the OECD’s public consultation document entitled “Addressing the Tax Challenges of the Digitalisation of the Economy,” released on 13 February 2019 (the “Consultation Document”).

The Consultation Document describes proposals that are being worked on through the Task Force on the Digital Economy (the “Task Force”) under the umbrella of the Inclusive Framework on BEPS (the “Inclusive Framework”) for consideration as part of the Inclusive Framework’s efforts to develop a consensus on a long-term solution to the broader tax challenges arising from the digitalization of the economy, as well as to address remaining BEPS concerns of member countries.

Setting the scene

In their communiqué following the #Hangzhou summit in September 2016, the G-20 Leaders requested that the #OECD and #IMF work on addressing tax certainty in recognition of the heightened concern that #uncertainty in tax matters, especially in the context of international tax, would adversely impact cross–border investment and #trade2. In response to this request, the OECD and IMF issued a report in 2017 based on surveys of over 700 businesses and 25 tax jurisdictions (the “OECD/IMF Report”). This report observes that “providing greater tax certainty to taxpayers to support trade, investment and economic growth has become a shared priority of governments and businesses.” The surveys conducted reveal a widespread sentiment that both uncertainty and tax disputes are increasing, causing concerns for business, who need to be able to reliably understand the tax consequences of their business decisions, and for governments, who need to be able to obtain predictable streams of revenue while encouraging investment3. The OECD/IMF Report notes further that the rise in uncertainty has been driven by factors including, in particular, the proliferation of fragmented and unilateral policy decisions (in response new business models in the context of #digitalization), as well as the transition period during the implementation of the #BEPS measures. Ultimately, one of the key findings emerging from the OECD/IMF Report is that both business and tax administrations agree that **“legislative and tax policy design issues are a major source of tax uncertainty, mainly through complex and poorly drafted tax legislation and the frequency of legislative changes.” **

In light of these findings, it is clear that an overwhelming consensus already exists that (i) tax uncertainty is bad for business, tax administrations and the economy, and (ii) unilateral measures, complex, poorly designed laws, and frequent changes in law all contribute to uncertainty. KPMG believes that the key to achieving consensus in the current initiative will be for the work of the inclusive framework to be guided by and build upon this already existing consensus view.

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