Chartered Accountants Ireland, under CCAB-I, has submitted its response to the OECD Discussion Draft on the taxation of the Digital Economy. This Draft was issued as part of the broader Base Erosion and Profit Shifting project being sponsored by the G20. We offered some initial comments on this matter to the OECD in December of last year.

Given the tight timescale offered by the OECD, our response focuses on specific aspects of the Discussion Draft. The general comments are as follows:

• If the proposals are followed through they could result in a fundamental change to the business model for many companies, major multinationals and smaller indigenous exporters of digital products and services alike.
• The most challenging proposals are those which involve a redefi nition of the current Permanent Establishment concept, for example the introduction of a “virtual” Permanent Establishment.
• We are not convinced that digital economy companies should be taxed differently, and we see this as a departure from the Ottawa principles.
• The proposals would of themselves distort and potentially erode the existing tax base of both Ireland and the UK.

As reported in the January 2014 issue of tax. point, Chartered Accountants Ireland responded to a request for input from the OECD when it was commencing its examination of Digital Economy tax issues, under the auspices of the BEPS project.

The CCAB-I response to the OECD Discussion Draft on the taxation of the Digital Economy is published here.

Chartered Accountants Ireland also submitted a response to a parallel consultation, “Prevent Treaty Abuse” which is another part of the BEPS project. Again, given the short time frame offered for analysis and comment, the CCAB-I response highlights the difficulties with one of the specific proposals ‘Limitation of Benefits’ which would limit the treaty benefits available by reference to the location of ownership of a company.

The CCAB-I response to the OECD Discussion Draft on action 6 (Prevent Treaty Abuse) of the BEPS action plan is also published here.

In this issue of tax.point Peter Vale and Sarah Meredith outline the OECD BEPS Project and the risks and opportunities for Ireland.