In this Insights, the CRA Transfer Pricing Practice provides an update on the most recent developments on BEPS Action 1: Addressing the Tax Challenges of the Digital Economy, as well as on the ongoing Altera case (Altera Corp. v. Commissioner).
OECD member countries and tax practitioners see various hurdles to reaching agreement on the proposed Guidelines on the Digital Economy. These Guidelines go well beyond the existing BEPS Guidelines and explore fundamental changes to the international tax architecture. While each tax authority must examine the implications of the proposed Guidelines on its own tax revenue, it must also engage with other OECD member countries to come to consensus. In order to agree on the long-term solution, there must be a unified, consensus-based solution among the member countries. This process will also require the right balance between precision and administrability for each tax jurisdiction. If there is no consensus, then we can expect each country to continue with its own methodology on the taxation of Digital transactions.
OECD issues guidance on transfer pricing implications of COVID-19
The Guidance is not prescriptive and leaves solutions to the issues that it raises unanswered. We note that the Guidance is not binding on tax administrations...