Ten Questions About Why and How to Tax the Digitalized Economy


Wolfgang Schön

International organisations, tax scholars around the world and business experts are intensely debating the future shape of the taxation of the digitalised economy. Starting from the assumption that any “ring-fencing” of the digitalised 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.

As Wolfgang Schön points out, general notions like “economic allegiance” or the “benefit principle” 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 with regard to 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.

Wolfgang Schön suggests that anybody who attempts to introduce a specific tax treatment for the digitalised economy should be as transparent as possible with regard to the ten major policy questions outlined in his article.

Veröffentlichung:   Bulletin for International Taxation, 2018, Vol. 72, No. 4/5, 278–292