On Taxation of the Digital Economy. Where Are We Now and Where Are We Going?

Abstract

This study aims to contribute to the continuing discussion about the compatibility and feasibility of the OECD/G20 October Statement. By this means, a literature review is conducted to gain appropriate considerations to the Pillar One and Two implementations. Amongst the findings are that: i) Approach Pillar 1A: This philosophy eliminates the request-demand principle and adopts a uniform approach to taxation and will allow developing countries to focus on their core activities and avoid becoming part of an open market environment; ii) As countries step up their efforts to attract more income-producing businesses, they will need to adopt more sophisticated tax systems to compete effectively. A new tax system is limited by a set of barriers that prevent it from becoming overly complex and inefficient; iii) the main reason for limiting competition is that tax administrations deliver lower-quality services to their clients. A new approach will allow tax administrations to compete more effectively; and iv) Since many tax administrations with DST income will lose what they gain due to the implementation of Pillar 1&2, the real results will need to be studied.

Keywords

• digital economy
• globalization
• global minimum tax
• digital service tax
• transfer pricing
• tax administration