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“Study Group on International Taxation in the Digital Economy” to be Inaugurated

March 1, 2021

The Ministry of Economy, Trade and Industry (METI) inaugurates a “Study Group on International Taxation in the Digital Economy” to hold discussions on ideal approaches to fair international taxation that contributes to enhancement of Japanese companies’ competitiveness and vitalization of the Japanese economy amid the acceleration of economic digitalization. The group will hold its first meeting on March 1 (Mon.), 2021.

1. Purpose of the inauguration

As economic digitalization accelerates, startups are increasing in number in emerging countries as consumer markets expand there. Japanese companies are facing fiercer competition with European and Asian companies and an increasing number of them have been changing business models overseas as seen in collaboration or M&A with local companies in addition to incorporating wholly-owned overseas companies. On the other hand, Japanese companies also urgently need to strengthen domestic supply chain resilience and address the data economy. In light of this situation, METI inaugurates a Study Group on International Taxation in the Digital Economy to hold discussions on future short- to mid-term approaches to enhancing Japanese companies’ competitiveness and developing fair international taxation that contributes to vitalization of the Japanese economy, taking into consideration international deliberations by the OECD and other organizations on digital taxation.

2. Examples of points of contention on which the study group will hold discussions

The study group will ascertain implications of tax system reforms in major world economies, such as international deliberations and the Tax System Reform of the United States in 2017. Based on this, it will hold discussions on topics such as the following.

  1. Ideal approaches to fair taxation on overseas businesses run by Japanese companies with the large variety of potential and extant business models and competitive conditions with western companies taken into consideration (challenges in introducing minimum taxation targeting all countries (Pillar 2)); and

  2. Tax systems that contribute to fair competitive environments for Japanese companies with overseas digital companies in Japan (taking into consideration the international deliberations on tax-source distribution from digital and other companies to market countries (Pillar 1) and the study group’s assessment of the digital service tax (DST) in view of case examples of introduction of the DST in other countries).

3. Schedule and other information

The first meeting will be held on March 1 (Mon.), 2021. Following this, the meetings will be held about once a month and a certain amount of discussion results will be compiled into a report around the summer of 2021.

In addition, in light of the current situations involving the COVID-19 pandemic, the first meeting will be held online.

These meetings will not be open to the public in order to ensure an opportunity for study group members and other participants to exchange their opinions in a frank and free manner. However, the distributed materials and summaries of the minutes of the meetings will be publicized.

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