OECD countries agree global VAT principles

Member nations of the Paris-based, Organisation for Economic Co-operation and
Development, have agreed on two fundamental principles aimed at ensuring greater
fairness in applying VAT and other consumption taxes applied in cross-border
trades of services and intangibles.

Currently there are major problems in the way the taxes are applied across
different countries, which the OECD said was ‘creating obstacles to business
activity, hindering economic growth and distorting competition’.

Under the agreement, internationally-traded services and intangibles are to
be taxed according to the rules of the country where they are consumed, while it
has also been agreed that businesses should not bear the burden of value added
taxes except when stipulated by the law.

Detailed guidelines are now being considered, the FT reported.

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