INTERNATIONAL CORPORATE INCOME TAXATION FOR DIGITAL ECONOMY

Weaknesses in the outdated international corporate income tax system and digital economy create opportunities for tax base erosion and profit shifting (BEPS). OECD is addressing the tax challenges of BEPS and those of digitalization, an attempt that deserves a research study. Present international corporate income tax policy for digital economy is based on characteristics of digital businesses. It has failed to end BEPS completely. Proposed two pillar approach, an add on layer to tax policy based on the concept of structure of multinational enterprise groups is a major departure from this. Proposed approach divides the taxing rights between the source and residence jurisdictions and ensures that businesses pay a global minimum tax putting an end to tax havens and BEPS. Developed countries do not agree to sharing taxing rights with the source countries. In its place, UN tax proposal, article 12B, based on the bilateral treaty mechanism is worth considering. Pillar 2 unchallenged, is accepted widely, though in some aspects it favours the developed countries. The above is a lesson in tax policy making exercise at the global level in a volatile time. It also highlights the importance of interdisciplinary research.