Addressing the tax challenges of a digitalised economy : an analysis

Abstract

Purpose: The primary objective of this dissertation is to assess the impact of digitalised business transactions within the international taxation sphere. In view of the current discussions held amongst international tax bodies, the proposals set forth have been analysed against predominant factors promoting accountability for digitalised activities, that is the Value Creation concept as well as a Destination-Basis principle for taxation. The subject has been put on top of the agenda by multiple States, as consensus for a multilateral approach is being sought. Design: Semi-structured interviews were conducted with high-ranking officers within the Office of the Commissioner for Revenue and Ministry of Finance, tax practitioners, international taxation scholars, and Members of the European Parliament. A qualitative approach was adopted, and open-ended questions were used. The data was collected and presented through the application of a thematic analysis. Findings: International taxation has been designed to suite brick-and-mortar businesses. The continuous innovation facilitated by digitalisation, trigger the need for a revision of the existing rules to capture transactions executed and concluded digitally. Conclusions: Whilst current tax laws need to be updated to capture a Permanent Establishment without the requirement of being physically present in a foreign State, the proposals set forward to date, direct a radical overhaul to the existing tax system. The technicalities involved, as set forth in said proposals, are critical and international pressure to reach consensus has been heightened from all over the globe. Implications: This subject area is gaining traction on an international level, and priority is being given by jurisdictions in order to obtain a uniform approach. Media attention is amplified as significant efforts are constantly being displayed by legislators, tax practitioners and governments alike. It is therefore timely to investigate the international tax reform proposed by the EU and the OECD, particularly since this shall have a considerable impact on various key players, whatever the outcome.