VAT on internationally traded services and intangibles - a first step toward OECD guidelines

Value added tax (VAT), also referred to as "goods and services tax" (GST), is implemented worldwide and across the OECD countries in various forms. Today, about 136 countries, including all the OECD Member countries except the United States, have implemented a VAT, which has become a robust revenue-raiser, preferred for its neutral and transparent nature. But in our global economy with new international business models and increasing internationally traded services and intangibles, diverging implementation of VAT principles gives rise to double taxation and non-taxation. In this respect, the OECD has issued a report entitled "Application of consumption taxes to internationally traded services and intangibles principles", which found that the effects of existing double taxation and non-taxation for both governments and businesses are significant enough to justify the design of common principles. This article looks at the common principles enunciated by the OECD.