Digital economy and international taxation

In recent years, the rapid development of information technology has changed the way businesses operate. The digitalization of the economy facilitated business processes and improved cost efficiency. In addition, digitalization has also led to the development of new ‘pure digital’ transactions, such as cloud computing and the sale of digital content or software. The scope of this research proposal will be limited to the latter.

The increased digitalization of the economy has led to corporate tax challenges on an international level. On the one hand, different stakeholders have expressed growing concern about base erosion and profit shifting (BEPS) issues of large digital Multinational Entities. On the other hand, corporate tax challenges go beyond the BEPS discussion because digital business models put the fundamentals of current corporate tax rules into question since they are based on the outdated assumption that businesses need physical presence (such as premises/employees) to conduct business in a market jurisdiction.

Reform proposals have already been made to mitigate the corporate tax challenges posed by digital transactions. However, current proposals vary and go in different directions. The proposed research intends to devise an appropriate international corporate tax framework for ‘pure digital’ transactions to be assessed in light of a defined normative framework. Ideally, the outcome of the analysis will be that one of the reform proposals can be considered as appropriate in light of the defined normative framework. In the event that none of the proposals are appropriate, a different proposal will be formulated that ensures compliance with the different criteria