Countries Endorse Common VAT Rules

High-level officials representing 104 countries endorsed new OECD International VAT/GST Guidelines as the preferred, coherent global standard.

According to the Organisation for Economic Co-operation and Development (OECD), the decision to draft the guidelines is a response to growing concerns over the rising volume of cross-border services and online purchases and downloads from outside the consumers’ home jurisdictions on which no indirect tax has been paid.

Global Forum Meeting

The officials gathered in Paris for a recent OECD Global Forum on VAT meeting and examined the progress made toward completing the guidelines.

Notably, new elements of the guidelines include:

  • A recommended solution for the effective collection of VAT/GST on remote business-to-consumer sales of digital products (including Internet downloads) by foreign suppliers,
  • A recommendation that foreign sellers register and remit tax on sales of e-books, apps, music, videos and other digital goods in the jurisdiction where the consumer is located, and
  • A recommended mechanism to ensure the effective collection of VAT by tax authorities from foreign sellers.

Work Areas

In addition to endorsing the guidelines, the high-level officials urged the OECD to develop packages to support the effective and consistent implementation of these guidelines and to work on areas that are not yet covered by them. These work areas could include:

  • Research and analysis of approaches to improve neutrality and overall performance of VAT systems, such as through the design and implementation of efficient VAT refund mechanisms and risk assessment processes,
  • The development of a possible framework for the exchange of information and enhanced administrative cooperation in the area of VAT,
  • The application of VAT to cross-border trade in goods, including the collection of VAT on low value imports, and best practices to address compliance issues, and
  • The interaction between VAT and the international direct tax framework, notably in the area of transfer pricing.

What’s Ahead?

The officials indicate that they look forward to the development of the OECD’s recommendation in 2016 “that will embody the complete set of guidelines and that will be open to adherence by all interested non-OECD Members.”