Taxation in the Digital Economy – Recent Policy Developments and the Question of Value Creation

34 Pages Posted: 8 Apr 2019

See all articles by Marcel Olbert

Marcel Olbert

University of Mannheim - Business School

Christoph Spengel

Centre for European Economic Research (ZEW)

Date Written: 2019

Abstract

The paper reviews the evidence on the challenges of digitalization for direct (corporate profit) and indirect (consumption) taxation. Based on both anecdotal and empirical evidence, we evaluate ongoing developments at the OECD and European Union level and argue that there is no justification for introducing a new tax order for digital businesses. In particular, the significant digital presence and the digital services tax as put forward by the European Commission will most likely distort corporate decisions and spur tax competition. To contribute to the development of tax rules in line with value creation as the gold standard for profit taxation the paper discusses data as a “new” value-driving asset in the digital economy. It draws on insights from interdisciplinary research to highlight that the value of data emerges through proprietary activities conducted within businesses. We ultimately discuss how existing transfer pricing solutions can be adapted to business models employing data mining.

Keywords: Digital Economy, Corporate Taxation, Business Model Analysis, Data Mining, Tax Planning

JEL Classification: H20, H25, H26, L21, L86, M14

Suggested Citation

Olbert, Marcel and Spengel, Christoph, Taxation in the Digital Economy – Recent Policy Developments and the Question of Value Creation (2019). ZEW - Centre for European Economic Research Discussion Paper No. 19-010. Available at SSRN: https://ssrn.com/abstract=3368092 or http://dx.doi.org/10.2139/ssrn.3368092

Marcel Olbert

University of Mannheim - Business School ( email )

Schloss Ostflügel
Mannheim, 68131
Germany

Christoph Spengel (Contact Author)

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

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