By Julie Martin, Editor, MNE Tax
A UN Committee of Experts on International Cooperation in Tax Matters subcommittee has concluded that the drafting group developing proposed UN model tax treaty Article 12B, addressing the taxation of automated digital services, should continue its work.
A revised version of the draft article should be presented at the Committee of Experts 21st session, at which time next steps should be decided, the Subcommittee on Tax Challenges Related to the Digitalization of the Economy said in a document released after their August 25–27 meetings.
The proposed optional article and its commentary, publically released on August 6, would grant additional taxing rights to a treaty country if a treaty partner’s automated digital services provider’s customers are located there. The proposal was developed at the subcommittee’s request by an ad hoc drafting group comprised of tax experts from developing countries.
Article 12B and its commentary depart significantly from an approach for taxing the digital economy being developed by the Inclusive Framework on BEPS, a 130+ country OECD-led coalition. While the OECD/Inclusive Framework’s “Pillar one” approach would require consensus among most countries, including countries such as the US that are opposed to increased taxation of digital giants, the UN approach would be optional and would only require agreement among tax treaty partners to be added to a tax treaty.
The Committee of Experts subcommittee noted that while there is considerable support for the proposal within the subcommittee, it was not yet an agreed document, and thus work would continue without prejudice to the position of any of the subcommittee members.
The UN drafting group should take into account comments made by subcommittee members and observers and incorporate those comments if they consider them worthy, the subcommittee added. Moreover, the subcommittee said that it would note the main comments of subcommittee members when briefing the full Committee of Experts.
The draft clause will be discussed at the UN Committee of Experts on International Cooperation in Tax Matters’ next meeting, its 21st session, which will be held virtually from October 20–November 6.
The Subcommittee on Tax Challenges Related to the Digitalization of the Economy is comprised of the following members, who work in their individual capacities: Abdoulfatah Moussa Arreh (Djibouti); Rajat Bansal (India); Margaret Moonga Chikuba (Zambia); Mitsuhiro Honda (Japan); Eric Nii Yarboi Mensah (Ghana); Dang Ngoc Minh (Viet Nam); Patricia Mongkhonvanit (Thailand); Marlene Patricia Nembhard-Parker (Jamaica); George Omondi Obell (Kenya); Carmel Peters (New Zealand); Carlos E. Protto (Argentina); Jorge Rachid (Brazil); Christoph Schelling (Switzerland); Alexandr Smirnov (Russian Federation); Stephanie Lynn Smith (Canada); Titia Stolte-Detring (Germany); Elfrieda Stewart Tamba (Liberia); Jose Ignacio Troya Gonzalez (Ecuador); Ingela Willfors (Sweden); Yan Xiong (China); and Sing Yuan Yong (Singapore).
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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