The current tax rules are still largely based on the ‘old’ economy in which physical presence in a country was often required for companies to do business locally. With the advent of internet, smartphones and other technological developments, this has completely changed. It is clear that the tax rules need to be adapted to bring them into line with current economic realities.
For companies in the digital economy, but also for traditional multinationals that are increasingly digitizing, it is important that new tax rules are enforceable and do not lead to double taxation. In order to avoid an international patchwork of different tax measures, it is important to find a common solution for the taxation of the digital economy on a global basis.
This topic has therefore long been high on the agenda of international organizations, such as the European Union and the Organisation for Economic Cooperation and Development (OECD).
In the absence of agreement on a global solution, it is likely that countries, or groups of countries (such as the European Union), will independently introduce new tax measures for the digital economy, creating an international patchwork of different, uncoordinated tax measures that could harm the global economy.
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If you have any questions about developments in the field of the digital economy and what these may mean for your company, please feel free to contact one of our experts.
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FAQ
What does the digital economy entail?
The digital economy encompasses all economic activities facilitated by digital technologies and the internet. It includes e-commerce, online services, digital payments, and data exchange. Companies in the digital economy utilize technologies to optimize their processes and reach new markets. The digital economy fosters innovation, increases efficiency, and offers new opportunities for growth, but also presents challenges.
What is digitization in the economy?
Digitization in the economy refers to the integration of digital technologies into economic processes and business models. Digitization transforms traditional industries through automation, enabling e-commerce, and creating new services and products. It promotes innovation and competitiveness but also presents challenges for businesses. Digitization plays a crucial role in modernizing the economy and driving sustainable growth.
What are the three pillars of the digital economy?
- Infrastructure: This includes the technological foundation such as broadband networks, data centers, and cloud computing that are essential for digital connectivity and services.
- Digital Platforms: These platforms, such as e-commerce sites and social media, facilitate interactions between consumers and businesses, and support the exchange of goods, services, and information.
- Data and Innovation: Data analysis and innovative technologies such as artificial intelligence drive decision-making, personalization, and the development of new products and services.
