One Answer to Why and How to Tax the Digitalized Economy

32 Pages Posted: 27 Jun 2019

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: June 25, 2019

Abstract

The question of why and how to tax the digitalized economy has been at the top of the international tax policy debate since the inception of the BEPS Action Plan in 2013. Over the years, a number of approaches have been discussed, including far-reaching proposals to fully or partially re-allocate taxing rights to market countries. In recent months, three options have emerged at the level of the Inclusive Framework/OECD: international taxation on the basis of “significant market presence”, taxation according to the value of “user contributions” and profit allocation to “marketing intangibles”. This article tries to assess the merits of these proposals against a number of benchmarks: revenue, fairness, and efficiency. Finally, this analysis leads to a different approach: taxation on the basis of “digital investment”, taking seriously the nature of the corporate income tax as a tax on return on country-specific investment while taking on board the legitimate concerns and aims of the current debate.

Keywords: International Taxation, Digital Economy, Tax Policy, Transfer Pricing, Taxing Rights, Digital Investment

JEL Classification: H21, H25, H26, H87, K34

Suggested Citation

Schön, Wolfgang, One Answer to Why and How to Tax the Digitalized Economy (June 25, 2019). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2019-10. Available at SSRN: https://ssrn.com/abstract=3409783 or http://dx.doi.org/10.2139/ssrn.3409783

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

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