Taxation in a Global Digital Economy

1. S. 124The Blurred Side of the Digital Economy

The importance of the digital economy and its effects were first introduced by Don Topscott in 1995. The digital economy is the result of the widespread and transformative process brought about by Information and Communication Technology (ICT). In his book, Topscott argues that the age of the digital economy is gradually forcing us to rethink the way we perceive the traditional definitions of economy, wealth creation, business organizations, and other institutional structures. Since the digital economy changes the way that we do business, tax laws have been challenged to adapt appropriately to the new business methods. Today, adapting the taxation rules to the digital economy has become necessary.

As a leader organization, the Organization for Economic Cooperation and Development (OECD) has started to change various existing rules and create new ones to deal with the digital economy. However, the OECD has not been fast enough; even more significantly, the full potential of the digital economy has yet to be realized in for properly dealing with the challenges that it poses to taxation. Because many new developments have occurred in the digita...