Co-author: Chris Morgan

Tax - a lightening rod

Tax is rarely, if ever, out of the headlines: that is because it is a rare connecting point between the individual, civil society, the state and the corporate world. It is the lightning rod through which many complex and charged issues of social justice, the common good and rewards for enterprise meet and mix.

We therefore need to develop tax policies that balance and re-balance the many issues that currently bedevil and divide our world: from boardroom and corporate excess, to low levels of productivity and investment; from inequalities between the global north and south to concentrations of wealth within nations; from climate change to mass population shifts; from issues of accountability and transparency, to rewards for hard work, enterprise, risk and endeavor.

The Responsible Tax Project

KPMG in the UK, and then KPMG International, launched the Responsible Tax Project with a singular thought: tax is the entry fee we pay for a civilised society. Without tax, there can be no roads, schools, hospitals, social care or security. The Responsible Tax Project has invited contributions from all corners of the debate: left to right; north to south; corporate to activist and NGO; policy maker to expert, academic and the media. Long may this last. Responsible Tax is the responsibility of us all - a civic negotiation, never a corporate or governmental imposition. By embracing multiple voices as equals, greater trustworthiness is built between stakeholders. The process is integral to developing the best outcome - good tax policy.

As Chris Morgan, Head of KPMG’s Global Tax Policy unit, has written on the Responsible Tax site:

“There is no one blueprint for a perfect tax regime. The mixture of taxes and the relevant rates will vary depending upon a country’s circumstances. But it was mostly corporation tax – and the perception that some multinationals were not paying their “fair share” – which prompted us to start the Responsible Tax Project in the UK in 2014. At that time the OECD’s Base Erosion and Profit Shifting (BEPS) project had just began. The agreed 15 Action Points are now in their 3rd year of implementation but interest in corporation tax has not died down. If anything, it has intensified with the focus on the taxation of highly digitalised companies.”

To this extent, the “digital tax” question is just a window into the wider challenges surrounding international corporate tax more generally. But it is uniquely challenging because of the scale, scope and pace of change.

This short paper sets out some of the issues and asks key questions concerning the future of corporation tax in a digital age. It follows extensive conversations, meetings, blogs and publications, in particular on Tax and the Developing World and What to Tax? in particular.


There is no doubt that the issue of international taxation is getting more challenging and complex. Global growth means there are more rules and more jurisdictions than ever. Driven by new technologies, businesses themselves are more complex; there are more intermediaries and the issues of intangibles and value creation add to the layers of complexity. Austerity, low growth and rising demand are squeezing public services everywhere. Furthermore, social media and global activism are increasing the demands for social justice, transparency and accountability.

It is critical here to recognize the political sensitivity of corporation tax in the popular mind of citizens and many politicians. It is seen by many as the only or best way of ensuring companies paying their way in society. Reform cannot be allowed to be equated with avoiding or evading responsibility. At the same time, there are more disputes than ever between MNEs and tax administrations over issues of double taxation - and digitisation is changing everything for everyone.

Coming down the line, because of the relentless march of new technologies, could be new approaches that that allow for real time tax evaluation and payments and more secure payments systems through blockchain.

The OECD’s Base Erosion and Profits Shifting (BEPS) programme did address a number of the perceived problems with the international tax accords, forged in the 20th Century, and the need to update the rules in the light of modern business models. Some have criticized the work as failing to deliver significant change. But it never set out to address the fundamentals and the established split of taxing rights between different countries. The BEPS action plan needs now to be fully implemented and that will take time. Nevertheless, it was certainly a major achievement in terms of global cooperation and an incrementalist approach to modernizing the rules.

The big question now is – do we need to revisit the basics, and if so, by how much?

The current debate

These questions are already being worked on by various rule setters, decision makers and other global bodies in this area. The OECD-led Inclusive Framework has committed to producing a report addressing digitalisation and international corporation tax by 2020; the UN has its own tax subcommittee considering the impact of digitalisation; the EU continues to look as these issues as well as, for example, the common consolidated corporate tax base; while the IMF has recently published its own paper on the future of corporation tax.

The Inclusive Framework released a consultation document in February and feedback was discussed at a conference in Paris on 13 and 14 March. The consultation document contains proposals grouped into two “pillars”. The second is a global minimum tax regime and first outlines three possible approaches for changing the allocation of taxing rights:

  1. Allocating some taxing rights over marketing intangibles to “market jurisdictions” (ie where the sales are made) – which, some economists have argued will shift some of the tax base out of countries which invest in research and development and high end exports.
  2. A digital user concept – where some of the taxable profits would be allocated to a country based on the interaction with users; this is quite narrowly focused but does attempt to “ring fence” certain digitalized businesess.
  3. A proposal from the G24, underwhich having a “significant economic presence” in a country could be new basis for taxing rights.

The OECD’s Policy Note, released just prior to the consultation admitted that: “these proposals would lead to solutions that go beyond the arm’s length principle.” Therefore, it is pretty clear that there is a general consensus that some changes to the fundamental principles are required. Other stakeholders in the debate however still champion far more reaching changes such as Formulary Apportionment or a destination based cashflow tax.

The Responsible Tax initiative does not seek to bypass or duplicate any of these essential projects or ideas but looks to add to the debate in the spirit of cooperation and transparency. In particular, we want to help ensure that discussion and decisions are:

  • Based around an ethical and moral axis
  • Guided by a set of underlying global tax principles
  • Rooted in the real problems citizens, countries, continents and corporates face
  • Looked at holistically – examining globalization, digitization and corporate tax together and not separately
  • Negotiated by all the relevant global stakeholders – answers cannot be imposed from above or from any side
  • Future-proofed, as far as possible
  • Set within renewed or new global institutional frameworks, structures and networks

Whatever the agreed outcome, as Chris Morgan has said:

“Creating an international corporation tax accord which works for the 21st Century is critical for supporting economic growth (for example by avoiding tax wars and double taxation), for ensuring that returns to capital are properly taxed and for creating international equity."

We are inviting contributions to this debate - looking to work with allies and contributors who share an open, inquiring and ambitious approach – rooted in the common good. Initially we would like your top line views on a number of issues – we will publish the results anonymously unless we seek and get your permission.

To start - Ten key questions

  1. What is the nature of the problems we currently face when it comes to the global tax debate?
  2. What are the global tax principles that should guide any response?
  3. Is there now general agreement that digital companies or a digital economy cannot be separated out from the economy as a whole?
  4. Is it simply a matter of strengthening anti-avoidance rules?
  5. Do any of the ideas listed above adequatedly meet points 1, 2 and 3?
  6. Do we need more fundamental reform of the CT system?
  7. Are there other alternatives to CT – for instance can indirect, land and other taxes be applied more effectively and fairly than CT?
  8. How is any of this accomplished without “tax wars”, or adding layer upon layer of complexity or double taxation?
  9. Are responses meeting future developments and challenges?
  10. Are the institutions we have capable of delivering any new agenda – do they need developing or do we need new bodies?

Next steps


This needs to be a debate with as many of the key players as possible, from national and regional governments and institutions (e.g. the EU institutions and regional development banks), to global bodies (OECD, UN, World Bank, IMF), activists and NGO groups, through to academics, think tanks and the media.


As a first stage we are seeking short but focused reactions to this paper – to ask people in written, recorded and filmed responses to say what they think: is new thinking needed, and if so what are the key priorities, issues and most importantly problems and questions? It would start around a discussion, based on principles.


The conversation starts now. Then, in the Summer 2019, we will find ways to convene meetings to thrash out more of the details.

Along the way, we will publish our views, those of others and build

an iterative process of thoughts, challenges and ideas worthy of the global tax responsibilities we face.


The eventual outcome might take the form of a presentation, report or film – but we want to have a big influence on the scope and scale of the global tax debate.