The international tax system is based on a company’ s physical presence in a specific location. Ecommerce has disrupted how taxes flow, as companies can make substantial profits where they are not physically present. Governments and the public fear that companies do not pay the correct taxes in the right place. Therefore, the EU and OECD have taken action to more effectively collect tax on the revenue from digital activities.
This paper primarily summarises the EU’s Digital Services Tax and the OECD’s Digital Tax proposal. It does not aim to be exhaustive on all such measures.
The question on how to properly tax digital companies is far from being solved and this will likely remain an important policy priority. We thus intend to update this factsheet whenever there is a major new development.