TaxPersonal TaxOECD e-tax agreement ‘lacks clarity’

OECD e-tax agreement 'lacks clarity'

Tax experts have hit out against the latest Organisation for Economic Co-operation and Development proposal for e-commerce taxation, saying the plan lacks clarity and will do little to reduce burdens on business.

The OCED’s committee on fiscal affairs last week reached a consensus on whether a website and server constituted a taxable presence in a country.

According to the OECD, a website alone was not a taxable presence but a server that carried out more than ‘preparatory or auxiliary’ functions was a permanent establishment.

But Chris Scott, e-tax partner at KPMG said: ‘The OECD document will give rise to uncertainty for many UK companies that own servers located overseas.’

‘It means business will have to consider on a case-by-case basis whether servers in support of their e-commerce operations will constitute a permanent establishment,’ he added.

The identification of a permanent establishment is the basic criterion that determines whether a country has the right to tax an enterprise’s profits, an issue that has been widely debated as global e-commerce has increased.

Mike Perkins, director of e-business tax at PricewaterhouseCoopers, warned: ‘The fact that the OECD’s decision does not need new legislation in member countries to become effective makes this an immediate issue for any business trading electronically.’

Links

For details of the OECD consensus on e-commerce tax go to www.oecd.org/media/release.

Full details of the experts’ comments are on www.kpmg.co.uk and www.pwcglobal.co.uk.

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