The progressive policy shift in the debate on the international tax challenges of the digital economy: A “Pretext” for overhaul of the international tax regime?

Abstract

This contribution presents a critical overview of the policy and legal debate (primarily from a tax treaty law perspective) surrounding the challenges raised by the digitalisation of the economy for the international tax regime. The article addresses some key policy challenges inherent in the proposals for reform currently under consideration. It focuses in particular on the difficulties associated with fitting the concept of “value creation” within the pre-existing framework based on “source” and “residence”; a gradual transition from a primarily “supply” approach to a “supply and demand” approach in the understanding of “source”; and an implicit drift in the policy debate on the tax implications of the digitalised economy from a targeted analysis aimed at incrementally reforming the existing regime to a full-blown reconsideration of some of its fundamental tenets.