A Week in Review

OECD digitalisation of economy project update

You may recall that the OECD have been tasked by the G20 (itself having recognised the taxation challenges faced by numerous jurisdictions due to the digitalisation of the global economy), to obtain an internationally agreed solution, to the global digitalisation problem.

In June 2019, the G20 finance ministers and other leaders agreed to ‘The Programme of Work’, which in essence creates a two pillar approach to obtaining a solution:

Pillar 1 – development of re-allocation of profit and revised nexus rules which will be used to determine where tax should be paid and on what basis (‘nexus’), with the addition of rules as to what portion of taxes could or should be taxed in the jurisdictions where clients or users are located (‘profit allocation’); and,

Pillar 2 – design of a system that will ensure MNE’s pay a minimum level of tax, providing countries with new tools to protect their tax base from profit shifting to jurisdictions which tax these profits at below the minimum rate.

A public consultation document on a ‘united approach proposal’ to Pillar 1, has already been issued, with a meeting on the 21st & 22nd of November to hear public submissions on policy issues and technical aspects to Pillar 1 raised in the document, which will aid in the development of the solution to be included in a final report to be issued to the G20 in 2020.

A similar consultative document will be released early this month in relation to Pillar 2, with a public meeting to be organised in December to hear submissions from the public.

From IR’s perspective, you may also recall an update I provided earlier in the year on a proposed digital services tax (‘DST’) being introduced, if it was felt that the progress of an internationally developed solution was not making headway fast enough. It was stressed at the time that this would only ever be an interim measure however, any DST to be repealed once the international solution was implemented. I have seen no further IR update on the DST proposal accompanying this latest update by the OECD, so I suspect it’s still a position of continuing to monitor progress for the time being.

Tax Payments – have you paid in time?

Relatively hard on the heels of SPS 19/01 Tax payments – when received in time, issued in April 2019, IR has now issued a new draft SPS (ED0221), which will eventually replace SPS 19/01 from 1st March 2020.

The simple premise of the new SPS, is without any surprise, make a payment on or before the due date, and it will be treated as having being received in time, however, some of the more interesting takeaways from the draft in my view were:

• If you are going to use your banks electronic payment services, then naturally it makes sense to be fully up to speed with your banks processing system timeframes, so that you are not inadvertently treated as having made the payment on the following working day;

• Debit/credit cards are an acceptable payment method, but you will be charged a convenience fee of 1.42% by your bank, including overseas banks, although IR will pay the fee where the payment is in relation to either child support debt or student loan repayments;

• Cash/eftpos payments can no longer be made at an IR office;

• No cheque payments will be accepted post 1st March 2020, unless the taxpayer has a preagreed cheque exception arrangement with IR; and,

• Due dates that fall on a weekend or public holiday (including a province anniversary where the taxpayer usually makes their payment in that province) move to the next working day.

Should you wish to comment on ED0221, the deadline is 13th December 2019.

If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected]