Ten Questions About Why and How to Tax the Digitalized Economy

31 Pages Posted: 21 Dec 2017

See all articles by Wolfgang Schoen

Wolfgang Schoen

Max Planck Institute for Tax Law and Public Finance, Department of Business and Tax Law

Date Written: December 21, 2017

Abstract

Much work has been done by international organizations, tax scholars around the world and business experts on the future shape of the taxation of the digitalized economy. Starting from the assumption that any “ring-fencing” of the digitalized economy should be avoided, it is far from easy to develop a framework in the context of the corporate income tax to capture profits derived by cross-border digital transactions in an orderly way. General notions like “economic allegiance”, the “benefit principle” or “digital presence” are unhelpful when it comes to sharing the pie between production countries and destination countries. Empowering the market countries can follow two different trajectories: a set of rules based on the notion of “digital presence” which simply looks to the demand side of the market, or a set of rules based on the notion of “digital investment” as a proxy for a productive source of income set-up by the taxpayer in regard of the market. While these pathways should be explored in the next couple of years, any search for a “quick fix” might not only be distortive and inefficient, it might also stand in the way of a new international consensus built around a new set of overall tax principles. Temporary measures might easily translate into permanent measures. Anybody who attempts to introduce specific tax treatment for the digitalized economy should be as transparent as possible with regard to the ten major policy questions outlined in this article.

Keywords: International Tax Law, Digitalization, Digitized Economy, Corporate Tax, Tax Reform

JEL Classification: F23, H21, H25, H26, K34

Suggested Citation

Schön, Wolfgang, Ten Questions About Why and How to Tax the Digitalized Economy (December 21, 2017). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2017-11. Available at SSRN: https://ssrn.com/abstract=3091496 or http://dx.doi.org/10.2139/ssrn.3091496

Wolfgang Schön (Contact Author)

Max Planck Institute for Tax Law and Public Finance, Department of Business and Tax Law ( email )

Marstallplatz 1
Munich, 80539
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
970
rank
22,143
Abstract Views
2,304
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information