How the Unified approach proposed by the OECD seeks to expand the tax base?

The Organisation of Economic Co-operation and Development (OECD) has released a consultation paper proposing changes through a proposal called Unified Approach in the rules for taxing Internet giants such as Facebook, Apple, Google, Amazon, and Netflix.

Expanding Tax Base

These highly digitalised businesses style of giants such as Facebook, Apple, Google, Amazon, and Netflix enables them to operate remotely and have high profits.

A large number of these companies have moved their source of profits to countries with low tax rates, such as Ireland and operate remotely to have high profits.

What is Unified Approach?

The Unified Approach seeks to shift the standard of taxation from physical presence to sales in a particular market. That is will result in mandating the companies to pay more taxes in the markets in which they sell more.

The Unified Approach proposal will enable new taxing rights to countries with many users of such business models.

Under the Unified Approach the nexus would be based on sales. (Nexus in international tax refers to the operating presence in a country that makes a company taxable). The proposal suggests designing the new rule and determining significant involvement in the jurisdiction by assigning a revenue threshold in the market.

The approach which focuses on “large consumer-facing businesses, considers a 750-million-Euro revenue threshold. This would allow the rule to encompass those who enter the market through a distributor. It also means the rules would apply not just to large tech multinationals, but any firms with a presence online, such as automakers.


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