A New Global Tax Deal for the Digital Age

29 Pages Posted: 13 Nov 2019

See all articles by Allison Christians

Allison Christians

McGill University - Faculty of Law

Tarcisio Diniz Magalhaes

McGill University - Faculty of Law

Date Written: November 4, 2019


The OECD is currently in the midst of a project intended to tackle the tax challenges arising from the digitalization of the economy. As laid out in Pillar 1 of its program of work released in May 2019, the goal seemed broadly to develop consensus on a new taxing right, to allow countries to tax multinationals even in the absence of traditional physical presence. Upon inspection, the plan seems to be about rebalancing taxing rights mostly among the relatively affluent OECD member states plus a few other key non-OECD states. Viewed from this perspective, the urgent effort to forge a new global tax deal for the digital age is destined to forestall a much-needed discussion on the broader distributive implications of the current global tax deal. This Article therefore critically examines the emerging tax bargain. Part I begins with a brief survey of some of the main factors that prompted the OECD to turn its attention to this topic. Part II considers the origins and development of nexus in the international tax regime, showing why this concept is amenable to broad expansion. Part III examines the range of reforms currently under consideration, arguing that the framing on digitalization misses a necessary connection to other pressing international policy programs that are also under development, most notably a global commitment to building institutions that support sustainable economic development. The Article concludes with a prediction that on its current trajectory, the program of work on digitalization is likely to produce a new global tax deal that looks much like the old global tax deal, with a relatively modest redistribution of taxing rights among a few key states, thus missing an opportunity for meaningful reform.

Keywords: Taxation; Digitalisation; OECD; Digital Economy; Technology; Substantial Economic Presence; User Participation; Market Intangibles; Market Jurisdictions

JEL Classification: D63; E62; F02; F23; F42; H20; H25; H87; K33; K34; O19; O23; O38; O34; P16

Suggested Citation

Christians, Allison and Diniz Magalhaes, Tarcisio, A New Global Tax Deal for the Digital Age (November 4, 2019). Available at SSRN: https://ssrn.com/abstract=3480539 or http://dx.doi.org/10.2139/ssrn.3480539

Allison Christians (Contact Author)

McGill University - Faculty of Law ( email )

3644 Rue Peel
Montréal, Quebec

Tarcisio Diniz Magalhaes

McGill University - Faculty of Law ( email )

3644 Peel Street
Montreal H3A 1W9, Quebec

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