The OECD has been caught dawdling on the information superhighway, the Internet. This is surprising because the OECD dazzled us in 2015 with souped-up worldwide tax initiatives for nearly everyone. Corporations got hit by BEPS – base erosion and profit shifting. Individuals got hit by CRS – common reporting standard. But online digital operators somehow slipped through the cracks. Now the OECD has published a report laying bare the total lack of international consensus about taxing digital operators.BackgroundAs part of the OECD BEPS Project in 2015, the OECD considered the tax challenges raised by the digital economy but came to no conclusion on any action. It merely found that it would be impossible to ring-fence the digital economy from the rest of the economy.Digitalization raises a series of tax challenges regarding data, nexus and characterization (of a business presence). These challenges chiefly relate to the question of how taxing rights on income generated from cross-border activities in the digital age should be allocated among countries.It was agreed to continue to monitor developments in respect of digitalization with a further OECD report to be delivered by 2020 and an interim report to be produced by the end of 2018.In March 2017, the G-20 finance ministers got impatient and called on the OECD to bring forward the delivery of its interim report so that it would be finalized by April 2018.But guess what? The interim report just published on March 16 still reached no conclusion due to lack of consensus.While we wait for the OECD Billions of tax dollars and euros are apparently not being taxed under present tax rules. Due to public pressure and the general (non-digital) BEPS provisions, some multinationals have agreed to pay some tax in some countries – by adjusting transfer pricing or on-shoring valuable assets.Also, a few countries introduced their own taxes without waiting for the OECD. The UK and Australia introduced so-called diverted profits taxes. Turnover taxes or withholding taxes were introduced by France, Hungary, Italy and India. The US tax reform included various “America First” measures. Other countries are contemplating unilateral action.The OECD interim report devotes a page to describe the Israel Tax Authority’s Circular 4/2016, which announces that Israel feels capable of taxing cloud-based companies with a “significant digital presence.”What the interim OECD report does sayThe interim report identifies more characteristics in highly digitalized business models: “scale without mass”; heavy reliance on intangible assets; and the role of data and user participation, including network effects.Since BEPS was published, the OECD has assembled a coalition of member and non-member countries known as the Inclusive Framework. The different perspectives on digital taxation issues among the 113 members of the Inclusive Framework fall into three groups.The first group of countries considers that is currently a misalignment between where profits are taxed and where value is created. They believe value is created where (analytical) data is generated and where there is user participation or contribution.This group apparently includes both the EU and the UK A second group of countries also take the view that the digital economy leads to misalignments between the location in which profits are taxed and the location in which value is created.But the main factors are not only where data is generated and where there is user participation.A third group of countries consider that the BEPS package has largely addressed the concerns of double non-taxation. They do not agree there are issues of “scale without mass,” heavy reliance on intangible assets or user participation/contribution. They do not want investment in innovation to slow down. This group apparently includes the US.Then what happened?The same day the OECD published its interim report, US Treasury Secretary Steve Mnuchin issued the following statement on it: “The US firmly opposes proposals by any country to single out digital companies. Some of these companies are among the greatest contributors to US job creation and economic growth. Imposing new and redundant tax burdens would inhibit growth and ultimately harm workers and consumers.”And five days later, on March 21, the European Commission proposed new rules to tax digital business activities in a “fair and growth-friendly way” in the EU, starting with a 3% turnover tax for companies with worldwide revenues of €750 million or more.What now?Acknowledging these divergences, the OECD announced yet another review by 2020 of the “nexus” and “profit allocation” rules for digital operations in a search for a consensus-based solution. In the meantime, there is no consensus on the need for, or the merit of, interim measures. The OECD, almost out of desperation, said political support will be needed.CommentWe may be witnessing a renewed tax dispute between the US and UK among others. Are we back to the Boston Tea Party – no taxation without physical (not just digital) representation?As always, consult experienced tax advisers in each country at an early stage in specific firstname.lastname@example.orgThe writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.