Technology can enable taxpayers to use more sophisticated methods to avoid tax, and as such exacerbate Base Erosion and Profit Shifting (BEPS) issues. It can also impact taxpayer’s business models more generally, and as such raise more systematic policy challenges for the international tax framework, both for income tax and VAT purposes. Technology can also be a powerful tool for tax authorities to swiftly identify BEPS risks and improve compliance. A number of tax authorities have already achieved successes in preventing and detecting tax avoidance, tax evasion and fraud through the use of technology solutions, which has led to the recovery of billions of euros in tax revenue.

Tax challenges arising from digitalisation

More than 110 countries and jurisdictions have agreed to review key concepts of the international income tax system, responding to a mandate from the G20 Finance Ministers to work on the implications of digitalisation for taxation. The members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shiting (BEPS) agreed to carry out this work towards a consensus-based solution with the goal of producing a final report in 2020, with an update to the G20 in 2019, as set out in their Interim Report on the Tax Challenges Arising from Digitalisation.

The interim report includes an in-depth analysis of the changes to business models and value creation arising from digitalisation, and identifies characteristics that are frequently observed in certain highly digitalised business models. Describing the potential implications for the international tax rules, the Interim Report identifies the positions that different countries hold, which drive their approach to possible solutions. These approaches range from those countries that consider no action is needed, to those that consider there is a need for action that would take into account user contributions, through to others who consider that any changes should apply to the economy more broadly. The interim report lays the ground to move forward at the OECD towards a long-term multilateral solution in the next phase of work.

See also

Technology tools to tackle tax evasion and tax fraud

This report provides an overview of some of the technology tools that tax authorities have implemented to address tax evasion and tax fraud, focussing on electronic sales suppression and false invoicing.

It also includes a more technical catalogue of these technology solutions, with a view to encouraging other tax authorities that are facing the same types of risks to draw on that experience.

Furthermore it discusses complementary work that tax authorities are undertaking to address the cash economy and sharing economy, which, although not types of tax evasion and fraud themselves, can facilitate them.