Q1/2019 - OECD
OECD Expert Group on Artificial Intelligence, Dubai, 20 February 2019
At its meeting in Dubai in February 2019 (within the framework of the so-called World Government Summit), the OECD Expert Group on Artificial Intelligence agreed on a document to be submitted to the next meeting of the OECD Ministerial Council in May 2019. The document contains various definitions, five basic principles and recommendations for the OECD member states for developing national AI policies[1].
Going Digital Summit, Paris, 11 – 12 March 2019
The OECD “Going Digital Summit” concluded the first phase of the “OECD Going Digital Project”, which was started in 2017. The project aims at providing the OECD member states with guidelines and tools to master the digital transformation.
Three documents had been submitted to the conference:
- A strategy paper “Going Digital: Shaping Policies & Improving Lives“ with corner stones for a comprehensive digital strategy
- A plan for developing indicators to measure the progress of digitalisation
- A so-called “Going Digital Toolkit” that shall help the OECD states to implement their national policies. The two-day discussion touched on nearly all issues of digital economy[2]
One of the focal issues was the future of education and training. The OECD assumes that in the next ten years about 50 percent of all jobs will be affected by automation and artificial intelligence. But only 31 percent of today’s employees have the skills that are needed to cope with the challenges of the digital world. Among those with a lower level of education, the percentage with insufficient skills is even higher. A dramatic social problem must be expected to arise from this situation.
A second focus was the management of data as a critical resource of a digital economy. If data is the new currency, the “production of data” must be extended and obstacles that impede the flow of data within and across national borders must be eliminated. At the same time, however, the security of personal data and of privacy must be guaranteed and trust in the digital economy must be strengthened. The impact of social media on the quality of life of individuals and on the state of democracy must be investigated. By now, one third of all Internet users no longer trust social networks. 15 percent of all EU citizens reject banking transactions via the Internet because they doubt that they are secure.
A third focus was on the new generation of “digital divide” both within developed countries and between countries. New gaps between urban and rural areas, between small and large enterprises, between and within generations, countries and regions give birth to new societal problems. Today, for instance, only 11 percent of small and medium-sized enterprises in the OECD countries have sufficient capacities to carry out big data analyses, while nearly half of all large enterprises have integrated big data analysis in their operational processes. A growing gap must also be expected for IT patent applications. The OECD states are losing ground in this field. While 60 percent of Chinese patent applications come from the IT field, this figure amounts to only 33 percent for the OECD countries.
The outcome of the OECD Digital Summit will be discussed at the next meeting of the OECD Ministerial Council on 22 and 23 May in Paris. The session will be titled “Harnessing the Digital Transition for Sustainable Development: Opportunities and Challenges”.
OECD: Taxation and Digitalisation, March 2019
Between 13 February and 6 March 2019, OECD held a public consultation on “Taxation of the Digital Economy”. The topic has been on the OECD’s agenda for years[3].
Already in 2013, when it became obvious that tax avoidance was practiced by more and more large Internet platforms by seeking “tax heavens” in the borderless digital economy, the G20 states had asked the OECD to investigate the matter and develop recommendations for a global tax policy tailored to the conditions of the digital age (G20/OECD-BEPS Project (Base Erosion and Profit Shifting)). An initial action plan was agreed in 2015. Among other things it proposed avoidance of a low-tax competition among the G20 countries. The finance ministers of the G20 states extended the mandate of the BEPS Group through their G20 Task Force on the Digital Economy (TFDE)[4].
In the meantime, the European Union had made attempts to draft a separate EU regulation for the taxation of Internet companies. It had been guided by the principle that taxes must be paid at the place where profit is made. One criterion had been the user participation in the respective country. But no consensus was reached among the 28 EU Member States for this project. As a result, individual EU States, including France, adopted a national solution for the taxation of Internet companies (GAFA tax/Google, Amazon, Facebook, Apple). The Federal Government of Germany was among those who rejected the EU proposal. It argued that a comprehensive global solution was required and proposed to wait for the recommendations of the OECD before taking action[5].
After several years of work, the OECD now has submitted a document with the title “Addressing the Tax Challenges of the Digitalisation of the Economy”. It makes proposes various comprehensive sets of rules for an international tax policy in the digital age. One of the crucial statements is that the digital society is not separated from, but forms part of the “normal economy”. Thus, a separate “digital tax” would be difficult. Instead, the economic effects of digitalisation (Gig Economy, Shared Economy/Uber, Airbnb, Platform Economy/Google, Facebook etc.) should be taken into consideration in a revised and extended general international tax policy. Like the European Union, the OECD paper, too, controversially discusses user participation as part of the basis for tax calculation, and the precise definition of a “significant economic presence” in a specific country. The results of the consultation are planned to be presented at the G20 Ministerial Meeting in June 2019 in Fukuoka. A final report is scheduled for 2020.