Tax and Technology

1. Introduction

This chapter examines the tax base of the new proposals for granting income tax rights to jurisdictions in which consumers and users are located (the so-called market jurisdictions), particularly Amount A of the OECD’s Pillar One solution and Article 12B of the UN Model Double Taxation Convention (hereafter referred solely as Article 12B and Pillar One). Although both initiatives arguably share the same aim of overcoming the obstacles that the digital economy imposed on traditional tax policies, they have come up with different operating principles and income proxies for assessing their tax bases.

The purpose of this analysis is to identify the pros and cons of the tax bases of Pillar One (i.e. financial accounting net income) and Article 12B (i.e. gross revenues or net options based on group profitability) vis-à-vis their ultimate objective and the characteristics of the digital economy. Each of the proposals will be evaluated under the criteria of economic efficiency, tax planning resistance, and administrative simplicity.

S. 70The relevance of this theme is that, whereas other issues have taken the center of the discussions when it comes to the digital economy (e.g. avoi...