This report, The Role of Digital Platforms in the Collection of VAT/GST on Online Sales, was developed by the OECD to complement its report Mechanisms for the Effective Collection of VAT/GST. The latter report, which was delivered in 2017, provides detailed guidance for the consistent and effective implementation of the mechanisms for the collection of VAT/GST on online sales as recommended in the International VAT/GST Guidelines and in Addressing the Tax Challenges of the Digital Economy, Action 1 – 2015 Final Report of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

Against the backdrop of the continuous strong growth of online trade, the OECD's Working Party No.9 on Consumption Taxes (WP9) consisting of VAT/GST policy officials from OECD members and Partner countries, signalled an urgent need to continue work on possible approaches to further increase the efficiency of VAT/GST collection, particularly on online sales to final consumers (business-to-consumer or B2C trade). WP9 requested in particular that the possible involvement of digital platforms in the collection process be explored, recognising that such platforms may significantly enhance the effectiveness of VAT/GST collection given their important role in generating, facilitating and/or executing online sales. A number of jurisdictions indeed have implemented measures to involve digital platforms in collecting VAT/GST on online sales and reported positive outcomes in securing tax revenue. Other jurisdictions are considering similar reforms.

Against this background, this report analyses the possible roles of digital platforms in supporting the collection of VAT/GST on online sales of goods and services/intangibles, and provides guidance on possible implementation measures. It also recalls the range of other measures beyond possible VAT/GST obligations for digital platforms that tax authorities can implement to further enhance the effectiveness of VAT/GST collection on online trade.

This report does not try to define the term “digital platforms”, as it is a concept that is likely to evolve over time. They have notably been denominated “platforms”, “(online) marketplaces”, or “intermediaries” by the jurisdictions that have involved such actors in the collection of VAT/GST on online sales, or are considering doing so. This report uses the term “digital platform” as a generic term to refer to the actors in online sales that carry out the functions that can be considered essential for their involvement by tax authorities in the collection of VAT/GST on online sales. These can generally be described as the platforms that enable, by electronic means, direct interactions between two or more customers or participant groups (typically buyers and sellers) with two key characteristics:

(i) each group of participants (“side”) are customers of the platforms in some meaningful way, and (ii) the platform enables a direct interaction between the sides. These platforms are also known as multi-sided platforms.

This report endeavours to use neutral terminology rather than terminology which may already be used in specific jurisdictions or may have a different meaning across jurisdictions. It is important, therefore, for jurisdictions to take account of the broad meaning of the terms used together with the design and implementation considerations which also allow jurisdictions to tailor implementation to their own needs.

This report is intended to assist tax authorities in evaluating and developing possible measures to involve digital platforms in the VAT/GST collection on online sales, with particular guidance on transactions involving the importation of goods, with a view to maximising the effectiveness of such measures and their consistency across jurisdictions. International consistency will facilitate compliance, lower compliance costs and administrative burdens, and improve the effectiveness of VAT/GST collection, recognising in particular that digital platforms are likely to be faced with multi-jurisdictional obligations.

This report does not aim at detailed prescriptions for national legislation. Jurisdictions are sovereign with respect to the design and application of their laws. Rather the report seeks to present a range of possible approaches and discusses associated policy considerations. Its purpose is to serve as a reference point. It intends to assist policy makers in their efforts to evaluate and develop the legal and administrative framework in their jurisdictions taking into account their specific economic, legal, institutional, cultural and social circumstances and practices. This report also recognises the desirability for jurisdictions to consider the Ottawa Taxation Framework Conditions, notably in respect of neutrality, efficiency, certainty and simplicity, effectiveness and fairness, and flexibility, in framing and implementing the policy and administrative measures identified in the report.

This report is evolutionary in nature and will be reviewed regularly in light of the rapid development of technology, online sales and delivery processes.