Perceived Fairness in the Taxation of a Digital Business Model

Düsseldorf Working Papers in Applied Management and Economics, 47, (2018)

27 Pages Posted: 3 Jan 2019

See all articles by Stefan Greil

Stefan Greil

University of Hamburg

Christian Schwarz

University of Applied Sciences Duesseldorf

Stefan Stein

QUANTUM Steuerberatungsgesellschaft mbH

Date Written: December 18, 2018

Abstract

The “fair” taxation of digital business models is challenging. One of the key aspects — both policy makers and the public opinion consider as most pressuring — is the determination of intragroup transfer prices for intangibles used in digital business models. In this paper, we address the issue of a “perceived fair” taxation of the digital economy in the light of the arm’s length principle based on a survey with transfer pricing experts. The aim of the survey is not to estimate arm’s length profit allocations but rather to elicit fairness considerations in different transfer pricing related scenarios.

In a digital economy framework where arm’s length profits are distributed extremely inequitably, subjects perceive this distribution of profits as most unfair compared to more balanced scenarios. Consequently, subjects propose a “fair” distribution of profits that substantially differs from the exogenously given arm’s length allocation. In scenarios with a more balanced arm’s length allocation of profits, we find that the perceived fairness for the expert groups increases while a control group of business students is almost not influenced by the arm’s length allocation of profits.

Keywords: corporate income tax, profit-shifting, arm's length principle, fairness, digital economy

JEL Classification: D90, F23, H25, H26, K34

Suggested Citation

Greil, Stefan and Schwarz, Christian and Stein, Stefan, Perceived Fairness in the Taxation of a Digital Business Model (December 18, 2018). Düsseldorf Working Papers in Applied Management and Economics, 47, (2018). Available at SSRN: https://ssrn.com/abstract=3303530 or http://dx.doi.org/10.2139/ssrn.3303530

Stefan Greil

University of Hamburg ( email )

Hamburg, Hamburg 20146
Germany

Christian Schwarz (Contact Author)

University of Applied Sciences Duesseldorf ( email )

Münsterstraße
156
Düsseldorf, 40476
Germany

HOME PAGE: http://https://wiwi.hs-duesseldorf.de/personen/christian.schwarz/Seiten/default.aspx

Stefan Stein

QUANTUM Steuerberatungsgesellschaft mbH ( email )

Magirusstraße 35/2
Ulm, DE 89077
Germany

HOME PAGE: http://www.quantum-tax.de

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
96
Abstract Views
490
rank
282,766
PlumX Metrics