Digital Services Taxes and the Unified Approach under the Pillar One Proposal: Exploring the Nexus Frameworks Through the Example of Alibaba

Abstract

With the rise of online marketplaces operating across national borders, many customer jurisdictions have found themselves lacking an opportunity to tax profits from these marketplaces’ activities. The year 2021 will reveal whether there is an international agreement that gives customer jurisdictions the entitlement to tax these profits under the existing international income tax system, or whether these jurisdictions have no option but to create this entitlement unilaterally and outside this system. This article uses the example of Alibaba and its Taobao business to compare nexus frameworks offered by a digital services tax unilaterally introduced in some jurisdictions and the OECD’s Unified Approach under the Pillar One proposal for the international agreement.

Keywords: taxation of digital services, Pillar One proposal, digital services tax, DST

JEL Classification: K34