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OECD Turku Report envisages this process as follows: ‘This plan institutes a virtual organization by drawing on the strength of existing organizations while avoiding the creation of a new supervisory body. In essence, this approach mirrors that undertaken in Member States where various departments and ministers come together to forge international or regional policies. The horizontal nature and speed of electronic commerce necessitate a similar strategy at the international level.’
The OECD ministerial conference in Ottawa (1998) “A Borderless World: Realising the Potential of Electronic Commerce” has produced fruitful results. Among them is the most desirable consensus, namely, ‘Taxation Framework Conditions’ which establishes the basic principles that should guide the e-commerce taxation. These principles include neutrality, efficiency, certainty, simplicity, effectiveness, farness, and flexibility.
In order to implement the Ottawa Framework Conditions, the Committee of Fiscal Affairs set up five Technical Advisory Groups (TAGs) with a mandate to take the coordination process forward with the involvement of the business sector and non-member countries so as to come up with globally acceptable well-considered solutions. Of particular relevance to our discussion is the TAG on Monitoring the Application of Existing Treaty Norms for the Taxation of Business Profits in the context of Electronic Commerce. (Hereinafter referred to as Business Profits TAG).This TAG has as its mandate to examine the application and clarification of, and assessment of the alternatives to existing treaty key concepts relating in particular to:
- the concept of ‘place of effective management’
- the concept of a permanent establishment (PE);
- the attribution of profit to a server-PE, and
- transfer pricing issues.
The Business Profits TAG would provide their input into the deliberations of Working Party No.1 on Tax Conventions and Related Questions.
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