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Taxation in the digital economy: Recent policy developments and the question of value creation

Marcel Olbert and Christoph Spengel

No 19-010, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: The paper reviews the evidence on the challenges of digitalization for direct (corporate profit) and indirect (consumption) taxation. Based on both anecdotal and empirical evidence, we evaluate ongoing developments at the OECD and European Union level and argue that there is no justification for introducing a new tax order for digital businesses. In particular, the significant digital presence and the digital services tax as put forward by the European Commission will most likely distort corporate decisions and spur tax competition. To contribute to the development of tax rules in line with value creation as the gold standard for profit taxation the paper discusses data as a "new" value-driving asset in the digital economy. It draws on insights from interdisciplinary research to highlight that the value of data emerges through proprietary activities conducted within businesses. We ultimately discuss how existing transfer pricing solutions can be adapted to business models employing data mining.

Keywords: Digital Economy; Corporate Taxation; Business Model Analysis; Data Mining; Tax Planning (search for similar items in EconPapers)
JEL-codes: H20 H25 H26 L21 L86 M14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-eec, nep-pay, nep-pbe and nep-pub
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:19010

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