Presentation given at World Bank/IMF event on Strengthening Tax Systems in a Digitalizing World event, 2019

1. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Dr Martin Hearson
International Tax Reform,
Digitalization and
Developing Economies
Research Fellow & International Tax Programme Lead
20 October 2019

2. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Multilateral soft law
OECD / UN
Bilateral treaties Domestic law

3. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Lower-income
country
priorities
• Simpler to
administer/enforce
• Greater share of
tax base
• Bring digital
service providers
into the tax net

4. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
BEPS 2.0
drivers
• Reallocate some tax
base to ‘market
countries’
• Prevent unilateral
actions and
disputes
• Internationalisation
of US tax reform
Lower-income
country
priorities
• Simpler to
administer/enforce
• Greater share of
tax base
• Bring digital
service providers
into the tax net

5. International Centre for Tax and Development www.ictd.ac
Four tests of the digitalisation outcomes
1
2
3
4
Do they make corporate tax easier to
administer?
Do they give (proportionately) more taxing
rights to developing countries?
Do they adapt rules to the challenges of
digitalization?
Is there space for innovation?

6. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Pillar One
Pillar Two
Amount A
Amount B
Amount C
Income Inclusion Rule
Tax on Base-Eroding Payments
{
{

7. International Centre for Tax and Development www.ictd.ac
Some issues from the perspective
of developing countries
Pillar One
• Scope
• Allocation
• Dispute resolution

8. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Pillar One
Pillar Two
Amount A
Amount B
Amount C
Income Inclusion Rule
Tax on Base-Eroding Payments
{
{

9. International Centre for Tax and Development www.ictd.ac
Some issues from the perspective
of developing countries
Pillar One
• Scope
• Allocation
• Dispute resolution
Pillar Two
• Rate
• Rule order
• Tax incentives
Cross-cutting
• Access to
information
• Restrictions on
innovation

10. International Centre for Tax and Development www.ictd.ac
Four tests of the digitalisation outcomes
1
2
3
4
Do they make corporate tax easier to
administer?
Do they give (proportionately) more taxing
rights to developing countries?
Do they adapt rules to the challenges of
digitalization?
Is there space for innovation?

11. International Centre for Tax and Development www.ictd.acInternational Centre for Tax and Development www.ictd.ac
Martin Hearson
Thank you
Research Fellow & International Tax Programme Lead
m.hearson@ids.ac.uk
@martinhearson