OECD/G20 Pillar One Proposal to Address Tax Challenges Arising from Digitalisation of Economy

Abstract

This master's thesis defines the nature of the modern international tax system and the generally accepted fundamental principles of the current tax regime. It also investigates the impact and consequences of the digitisation of the economy on current international tax regulation and explores the challenges facing the international community to overcome them. The main elements of the revolutionary Pillar One proposal are revealed, and the main problems that may arise in its implementation are identified. Other possible ways of solving tax challenges are also analysed. This paper raises the question of the ability of the proposed BEPS/G20 Inclusive Framework Pillar One reform to solve the problem of tax avoidance in the jurisdiction of the market where large digital corporations carry out their business activities, bypassing the establishment of a permanent establishment. The study concludes that although Pillar One is an essential and comprehensive work with important aspects, in particular, global support is needed for such large-scale reform. However, there are other, more effective ways to address the tax challenges arising from the digitalisation of the economy. In addition, the implementation of Pillar One depends on overcoming the problems identified in this paper and finding a comprehensive international agreement, which is called into question, and, accordingly, the possibility of the proposal to change the international tax system.