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Could new taxation rules be on the horizon?

Published 4th April 2016

The digital economy is an ever-increasing aspect of Australia’s overall economy. But, could a new commission set up by the European Union (EU) mean that there are new taxation rules coming for the UK?

Additionally, what does this mean for contractor services in Australia and the wider digital industry?

What does the Commission aim to achieve?

The group consists of a number of high-level experts in the field of taxation. Some of these include:

  • Mr Gaspar, the former finance minister of Portugal
  • Ms Tea Varrak, part of the Innovation and Business Centre Mektory in Estonia
  • Mr Bjorn Westberg, from Jonkoping International Business School in Sweden.
  • Additionally, the Oxford Centre for Business Taxation announced in December that its director, Professor Michael Devereux, had been appointed to the newly formed commission.

    The aim of the commission is to identify a number of opportunities to improve and restructure the current way the digital economy is taxed in the European Union.

    One of the tasks Professor Devereux and his colleagues will be responsible for is the measurement and review of benefits and risks associated with the various approaches to taxation currently in place or under consideration.

    To accomplish this, the group will focus on the challenges and barriers that are inherent within the current framework and present a series of solutions that aim to make taxing the digital economy viable.

    With this new commission setting its sights on the current framework that governs taxation in the EU, the UK can expect added pressure to comply.

    Yet, what could this spell for Australia? Could this new focus on the digital economy segue into the antipodes and drive the government to its own review program?

    Is Australia’s digital economy a viable source of revenue?

    Australia has a vibrant and productive digital economy and it is becoming more than an auxiliary source of revenue for the government. From IT contractor management to cloud-based software, the digital economy in Australia is filled with a range of products.

    A report released by Deloitte shows that digital technologies are one of the fastest-rising aspects of the Australian economy. In value terms, its has added $79 billion in 2013-14 – rising from $50 billion in 2011.

    Additionally, there is five per cent growth in the volume of information and communications technology (ICT) professionals, with an increase in 600,000 ICT workers in 2014 alone. The report identifies a future demand for 100,000 workers over the course of the next six years.

    With the rising need for contractor assistance, this number can only grow higher. The ICT sector is forecast to grow annually by 2.5 per cent over the next five years until 2020. This rate of growth is significantly higher than the employment for the economy in general – which is expected to grow by 1.6 per cent.

    However, with so many goods and services that are produced in Australia, there may be an expectation that there is a need for a new taxation framework.

    What challenges would the government face?

    As Australia’s digital economy is becoming more and more integral to the nation’s wider economy, there are a number of challenges that present themselves.

    According to the Organisation for Economic Cooperation and Development (OECD), there are a number of solutions that can provide countries with the required knowledge to construct a viable framework.

    The OECD instigated a Base Erosion and Profit Shifting (BEPS) Project in an effort to mitigate the effects created by international laws that enables companies to avoid taxation and shift profits overseas.

    It is important that ICT professionals, especially those that engage in contractor services, keep up to date on the trends and patterns occurring in the EU and around the world in relation to BEPS taxation. Otherwise, they could run the risk of being on the wrong side of any new tax laws.

    If you would like to know more about compliance and wealth management services, talk to the experts at Oncore Services today.