Special issue on taxation in the digital economy

• Author: Maya Bacache‐Beauvallet,Francis Bloch
• Date: 01 February 2018
• DOI: http://doi.org/10.1111/jpet.12285
• Published date: 01 February 2018

DOI: 10.1111/jpet.12285

INTRODUCTION

Special issue on taxation in the digital economy

Maya Bacache-Beauvallet1Francis Bloch2

1TelecomParisTech

2UniversitéParis 1 and Paris School of Economics

MayaBacache Beauvallet, Telecom ParisTech,46 rue Barrault, 75013 Paris,France (maya.bacache@enst.fr). Francis Bloch, Université

Paris1 and Paris School of Economics, 48 Boulevard Jourdan, 75014 Paris, France(francis.bloch@univ-paris1.fr).

1INTRODUCTION

The rapid development of the digital economy raises new challenges to fiscal authorities. The digital economy makes

the assignment of economic transactions to specific jurisdictions more complex by blurring geographical boundaries,

raises issues on VAT/GST collection for electronic transactions across national boundaries, and relies on intangibles

which are difficult to monetize (algorithms, personal data, network effects). In recent years,these challenges have been

the object of public debate (particularly in Europe) and have led to intense discussions among policy-makers, both at

national and international levels.

A first issue is the low level of corporate income taxes paid by the major playersin the digital economy (on Inter-

net platforms, e-commerce platforms). Because of the nature of digital technologies, intangibles and the business and

financial functions of major digital multinational firms are extremely mobile, allowing these firms to grow in fiscally

optimal global structures. Most major Internet platforms choose the location of their activities in order to benefit from

low tax rates and from the provision of international tax treaties to reduce their corporateincome taxes. They manage

to transact a large volume of business in major industrialized countries yetpay very low taxes, even though their pres-

ence in these countries is well established. While these strategies of (legal) tax evasion are not specific to the digital

economy, heavyreliance of transactions on intangibles makes tax evasion easier in the digital economy. Faced with a

low levelof taxation of major multinational firms, some countries (Italy,France, or Hungary) have reacted by proposing

specific taxes on Internet access and use. Other countries (the United Kingdom) have entered into negotiations with

the multinational firms to increase the tax base. At the international level,discussions at the OECD have led to the pub-

lication of a report on September 2015 suggesting avenues for a reform of international treaties on transfer pricing to

accommodate the spread of the digital economy (OECD,2015).

A second issue is the difficulty of imposing value added and sales taxeson Internet transactions. This difficulty arises

first in peer-to-peer transactions, because monetary transactions among individuals are only liable to value added or

sales taxes if they are abovea threshold. When the transaction arises among agents in different jurisdictions, another

difficulty arises, as which tax rate should be applied needs to be specified.

Taxevasion in the digital economy has become a growing concern for a large number of governing bodies, includ-

ing the European Commission and the OECD. While the issues raised bytaxation in the digital economy have recently

emerged in public and policy debates, the academic literature on the subject remains scarce. The objective of this spe-

cial issue is thus to collect academic papers looking at various aspects of direct and indirect taxation for Internet plat-

forms and e-commerce. By providing funding and hosting discussions among policymakers and academics, CNNum

Journal of Public Economic Theory.2018;20:5–8. wileyonlinelibrary.com/journal/jpet c

2017 Wiley Periodicals,Inc. 5