The Digital Economy, Global Tax Reforms and Developing Countries – An Evaluation of Pillar I and Art. 12B UN Model

108 Pages Posted: 15 Apr 2024 Last revised: 22 Apr 2024

See all articles by Jost Heckemeyer

Jost Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research

Inga Schulz

University of Mannheim - Accounting and Taxation

Christoph Spengel

University of Mannheim - Accounting and Taxation; Centre for European Economic Research (ZEW)

Sarah Winter

University of Mannheim - Accounting and Taxation

Date Written: March 28, 2024

Abstract

This paper evaluates the Multilateral Convention to implement Pillar I Amount A, released by the OECD in October 2023, and the alternative proposal of Art. 12B for tax treaties suggested by the UN, with a particular emphasis on the perspective of developing countries. We conduct a comparative analysis of the proposals using an integrated economic and legal approach. Our assessment is based on the two proposals’ ability to generate tax revenue and their implications for net-importing countries. Our legal analysis demonstrates significant differences between the two proposals in the implied reallocation of taxing rights, depending on the considered (digital) business model. Interestingly, we find that overall and despite its complexity, Pillar I Amount A addresses the specific interests of developing countries better than Art. 12B UN Model. In particular, Pillar I Amount A will likely outperform the UN’s proposal in terms of its tax revenue potential.

Keywords: Digital Economy, Corporate Tax, Global Tax Reform, OECD Pillar 1, Developing Countries

JEL Classification: F23, H25, H32, K34

Suggested Citation

Heckemeyer, Jost and Schulz, Inga and Spengel, Christoph and Winter, Sarah, The Digital Economy, Global Tax Reforms and Developing Countries – An Evaluation of Pillar I and Art. 12B UN Model (March 28, 2024). ZEW - Centre for European Economic Research Discussion Paper No. 24-022, Available at SSRN: https://ssrn.com/abstract=4776415 or http://dx.doi.org/10.2139/ssrn.4776415

Jost Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences ( email )

Kiel
Germany

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

Inga Schulz

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Christoph Spengel

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

Sarah Winter (Contact Author)

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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