OECD - The Role of Digital Platforms in the Collection of VAT/GST on Online Sales

The OECDs work on Value Added Taxes (VAT)/Goods and Services Taxes (GST) has in recent years primarily focused on the development of internationally agreed standards and recommended approaches for the consistent, efficient and effective application of national VAT/GST systems in the context of an increasingly digitalised and globalised economy.

These standards include the recommended rules and mechanisms to address the challenges of collecting the VAT/GST on digital sales, which had been identified in the context of the OECD/G20 Project on Base Erosion and Profit Shifting (the BEPS Project). This report, The Role of Digital Platforms in the Collection of VAT/GST on Online Sales is the latest addition to this work.

Electronic marketplaces and other digital platforms that facilitate online transactions between buyers and sellers play a central role in the continuous strong growth of online trade. Evidence suggests that two-thirds of all cross-border e-commerce sales of goods are made through online marketplaces. It has become increasingly obvious that this reality presents significant opportunities for a more efficient and effective collection of VAT/GST on online sales of goods, services and intangibles, particularly sales to private consumers. An increasing number of jurisdictions started work on possible measures to involve digital platforms in collecting VAT/GST on online sales. The jurisdictions that effectively implemented these measures reported positive outcomes in facilitating and improving compliance and securing tax revenue. Against this backdrop, the OECD was requested to develop internationally agreed guidance on measures for the efficient involvement of digital platforms in the VAT/GST collection on online sales that can be implemented consistently across jurisdictions.

Accordingly, this report provides practical guidance to tax authorities on the design and implementation of a variety of solutions for involving e-commerce marketplaces and other digital platforms in the effective and efficient collection of VAT/GST on digital trade of goods, services and intangibles. It includes new measures to make digital platforms liable for the VAT/GST on sales made by online traders through these platforms, along with other measures such as data sharing and enhanced co-operation between tax authorities and digital platforms. It builds further on the solutions for the effective collection of VAT/GST on digital sales presented in International VAT/GST Guidelines and Addressing the Tax Challenges of the Digital Economy, Action 1 2015 Final Report . It also complements the report on the Mechanisms for the Effective Collection of VAT/GST , which was delivered in 2017.

This report has been developed through an inclusive process, involving representatives from OECD members and from a large number of partner countries as well as through the active engagement of the business community. It was endorsed by the representatives from over 100 jurisdictions and international and regional organisations as well as from the business community at the fifth meeting of the Global Forum on VAT in Melbourne on 20-22 March 2019.

This report was approved by the Committee on Fiscal Affairs on 10 May 2019 and prepared for publication by the OECD Secretariat.