The Association of International Certified Professional Accountants (The Association) has said international coordination is needed to address taxation concerns regarding digital transactions and a general digitalization of the economy.
The Association is the combined body of the American Institute of CPAs and the Chartered Institute of Management Accountants.
According to The Association’s paper, Taxation of the digitalized economy: A policy paper designed to educate, enlighten and stimulate discussion, existing bodies are not addressing the “unique taxation challenges” brought about by the online environment.
The paper does not take stance on a specific tax proposal or law but does reference numerous proposals that are now being developed by international organisations.
The paper opens up a discussion around various principles where taxation is concerned. This includes: equity and fairness where similarly situated taxpayers are all taxed equally, certainty of tax rules, effective tax administration, economic growth and efficiency, and appropriate government revenues.
Double Taxation Relief
Existing frameworks that have been developed by the international tax community incorporate standards which provide determination of a state’s right to tax and provides for double taxation relief by means of both domestic tax law and international tax treaties.
In the digital age, the current double tax system has been put under strain.
The paper offers on a potential answer to this. The Association suggests digital tax needs to qualify as income-type of tax that meets the requirement and definition of covered tax under the present treaties.
The paper also calls for the international community to recognise this double taxation issue effecting digital tax and to create a globally accepted solution which is viable.
AICPA and CIMA said they have the intention of raising debates regarding the policy issues around taxes on digitalized services and to note the characteristics of taxes on the existing framework.