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Abstract

Much work has been done by international organizations, tax scholars around the world and business experts on the future shape of the taxation of the digitalized economy. Starting from the assumption that any “ring-fencing” of the digitalized economy should be avoided, it is far from easy to develop a framework in the context of the corporate income tax to capture profits derived by cross-border digital transactions in an orderly way. General notions like “economic allegiance”, the “benefit principle” or “digital presence” are unhelpful when it comes to sharing the pie between production countries and destination countries. Empowering the market countries can follow two different trajectories: a set of rules based on the notion of “digital presence” which simply looks to the demand side of the market, or a set of rules based on the notion of “digital investment” as a proxy for a productive source of income set-up by the taxpayer in regard of the market. While these pathways should be explored in the next couple of years, any search for a “quick fix” might not only be distortive and inefficient, it might also stand in the way of a new international consensus built around a new set of overall tax principles. Temporary measures might easily translate into permanent measures. Anybody who attempts to introduce specific tax treatment for the digitalized economy should be as transparent as possible with regard to the ten major policy questions outlined in this article.