Taxation in a Global Digital Economy

1. S. 46CFC Rules as a Limitation of Abuse

It is not necessary to introduce symptoms of globalisation, technology, and its related digital economy. It is a matter of looking around and absorbing modern society. Since flying to the moon came in a matter of time, one should realize how mobilized our world has become. People, goods, capital, enterprises, know-how – all of them can shift around the globe with almost no problem. The digital economy creates more opportunities than one can imagine but, on the other side of the coin, taxation problems or, more specifically, tax avoidance opportunities, could arise as a result of globalisation.

The digital economy increases mobility while the relevance of physical presence decreases, intangibles gain importance, and legal structures make it possible to legally shift income to low tax jurisdictions and avoid taxation in high tax jurisdictions. This idea creates the possibility to benefit from infrastructure and highly educated employees in one country and then shift profits afterwards to a low tax country in order to reduce the tax burden. The digitalised world creates opportunities to achieve base erosion and profit shifting (BEPS) by dividing cen...