Globalization has brought about an explosion in international trade and significant cross-border flows of capital, technology, expertise and personnel. Working within the boundaries of existing tax rules, global businesses have thus arranged their affairs in a manner to produce the best after-tax results.
For example, in the virtual world of the internet, it has become possible for global businesses to generate sales in a country without having a physical and therefore taxable presence there.
Action 1 of the BEPS Action Plan seeks to address the tax challenges of a digital economy. The discussion draft relating to Action 1 was released in March 2014 and suggested certain modifications to the PE definition: