Taxing Tech: The Future of Digital Taxation

52 Pages Posted: 8 Oct 2019 Last revised: 3 Sep 2020

Date Written: December 2, 2019


In recent months, France and the United Kingdom have announced new taxes that are designed to target large multinational tech companies. In response, the United States has threatened trade sanctions.

This article introduces the larger context of this controversy. The French and UK taxes are merely two examples of a much larger trend that has been taking place over the last several years, with countries around the world designing tax measures to target the so-called “digital economy” without ever determining what the digital economy is or how it differs from the rest of the economy.

This article argues that, despite the many differences between the dozens of digital tax measures proposed or implemented over the past decade, two fundamental similarities link them together. First, all of these measures illustrate that countries believe that the current international tax system, which was designed in the 1920s under the auspices of the League of Nations, is outdated and needs to be reformed. Second, these digital tax measures focus on three elements of the existing system that countries believe need to be reformed: the physical presence requirement, the low tax rates available in some countries, and the ability of multinationals in particular to earn income without having a physical presence or to shift income to low-tax jurisdictions.

Given these areas of agreement, this article considers the likelihood of countries reaching an international solution. This article acknowledges that an effective international solution—where countries agree to the necessary technical details and not just to high-level principles—faces serious challenges given that many countries now benefit from the current system. This article concludes that, if countries cannot agree to real international reform, then the international tax system will face many more years of countries imposing a cascade of inconsistent and overlapping digital tax measures on tech companies.

Keywords: digital tax, international tax, tax policy, GAFA

JEL Classification: F38, F39, F53, H20, H25, H27

Suggested Citation

Faulhaber, Lilian V., Taxing Tech: The Future of Digital Taxation (December 2, 2019). 39.2 Va. Tax Rev. 145 (2019), Available at SSRN:

Lilian V. Faulhaber (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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