The Digital Services Tax as a Tax on Location-Specific Rent

Cui, Wei; Hashimzade, Nigar

doi:10.2139/ssrn.3488812

Cited by 8 publications

(8 citation statements)

References 9 publications

(11 reference statements)

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“…Quality is the output of targeted investment and not the result of an explicitly modelled network externality. Cui and Hashimzade (2019) and Ogawa (2021) are examples of the latter modelling approach.…”

Section: Related Literaturementioning

confidence: 99%

Granting Market Countries the Right to Tax Profit Without Physical Nexus

Richter

2022

SSRN Journal

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Section: Related Literaturementioning

confidence: 99%

Granting Market Countries the Right to Tax Profit Without Physical Nexus

Richter

2022

SSRN Journal

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“…Quality is the output of targeted investment and not the result of an explicitly modelled network externality. Cui and Hashimzade (2019) and Ogawa ( 2021) are examples of the latter modelling approach. By assumption, 𝑃 𝑋 , 𝑝 𝑥 < 0.…”

Section: Related Literaturementioning

confidence: 99%

Granting Market Countries the Right to Tax Profit without Physical Nexus

Richter

2022

Preprint

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Almost 140 countries have accepted the OECD invitation to reform the taxation of multinational enterprises (MNEs). One of two reform pillars aims at granting market countries the right to tax supernormal (“residual”) profit without requiring physical nexus. This paper examines the method of implementation proposed by the OECD and compares it with various discarded options. It concludes that intercountry tax equity and allocative efficiency speak against the OECD proposal to use a sales-based formula for allocating an MNE’s group profit. Simply splitting each market country’s residual profit contribution by an MNE-independent key is to be preferred. An even more fundamental argument in favor of residual profit splitting (RPS) is practicability of negotiation. RPS is implementable within the well-established tradition of separate entity assessment. By contrast, the OECD proposal calls for steps toward unitary taxation to be implemented through a multinational convention, which could still prove to be a daunting hurdle in the international search for consensus.JEL Classification: H25, M48, F23

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“…Such an analogy can be expanded to the tax realm-if data on a country's citizens are viewed as a collective national asset, then just as the rents from natural resource extraction are taxed in the host country in which they are located, the same could be argued for personal data (IMF 2019, Aslam andShah 2020). And, just as in the extractive industries (Cui 2018(Cui , 2019IMF 2019), a royalty instrument (a tax on turnover) can substitute when direct taxation of rents is difficult, especially where hard-to-value intangibles play a large role or capacity is limited to monitor cost-based profit shifting. Current DSTs, including in Asia (Table 3) take on the flavor of (highly targeted) user-based royalties (Aslam and Shah 2020).…”

Section: Digital Services Taxesmentioning

confidence: 99%

Digitalization and Taxation in Asia

Mooij¹,

Shah²,

Hodge³

et al. 2021

Departmental Papers

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ADSAutomated Digital Service B2B Business to Business B2C Business to Consumer BEPS Base Erosion and Profit Shifting CbCR Country by Country Reporting CIT Corporate Income Tax Destination country Country in which the purchaser is located (same as market country) DST Digital Services Tax EL Equalization Levy EU European Union FA Formula Apportionment FDI Foreign Direct Investment G20 The G20 is the international forum that brings together the world's major economies GDP Gross Domestic Product GST Goods and Services Tax ICT Information and Communications Technology IF Inclusive Framework Investment Hub Generally refer to countries with a high ratio of FDI to GDP. For example, the OECD considers those countries with inward FDI greater than 150 percent of GDP to be an investment hub. Market country Country in which the purchaser is located (same as destination country) IGST Integrated Goods and Services Tax MNE Multinational Enterprise OECD Organisation for Economic Cooperation and Development v ©International Monetary Fund. Not for Redistribution DIGITALIZATION AND TAXATION IN ASIA DIGITALIZATION AND TAXATION IN ASIA vi ©International Monetary Fund. Not for Redistribution DIGITALIZATION AND TAXATION IN ASIA DIGITALIZATION AND TAXATION IN ASIA viii ©International Monetary Fund. Not for Redistribution This page intentionally left blankDigitalization has been impacting countries in Asia and this effect is set to grow in the aftermath of the COVID-19 pandemic. Digitalization has extended well beyond the information communications and technology (ICT) sector, with widespread internet usage underpinning e-commerce, fintech, as well as online financial and other services. In addition to firms selling goods and services through their own websites, online platforms and marketplaces have rapidly emerged that connect firms with consumers and consumers with each other. These business models are supported by cutting edge technologies, including artificial intelligence, machine learning, and big data. Local firms have emerged as major players, particularly in large markets such as China, Japan, and Indonesia, competing with US multinational enterprises (MNEs) operating in the region. The potential for further growth in internet usage and the shift away from in-person activities during the pandemic is likely to fuel the growth of large, digitalized businesses in Asia in coming years, as well as the adoption of digital technologies across the entire economy.The experience of digitalization varies across Asian countries depending on demographics, geography, and the stage of economic development. G20 economies such as China, Japan and Korea have large ICT sectors, including manufacturing, and well-established, locally headquartered, highly digitalized businesses engaging in e-commerce and online services. India and Indonesia are also rapidly developing markets for e-commerce and online services, with emerging local firms. Advanced services-based economies such as Australia and New Zealand are highly digitalized, although ICT-led manu...

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The Digital Services Tax as a Tax on Location-Specific Rent

Cited by 8 publications

References 9 publications

Granting Market Countries the Right to Tax Profit Without Physical Nexus

Granting Market Countries the Right to Tax Profit Without Physical Nexus

Granting Market Countries the Right to Tax Profit without Physical Nexus

Digitalization and Taxation in Asia

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