It’s likely that blockchain will impact on many areas of our lives but one area that’s being watched with close interest is the way in which it could be used by governments around the world.
The beta blog
< The beta blog | 30 Nov 2015
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International tax law could be argued to be no longer fit for purpose in the digital age. The 'permanent establishment' concept is a classic example of a tax rule that was devised for the industrial world and which struggles to cope with digital business.
One of the knock-on effects of digital technology is that it’s pushing us away from traditional employment and towards a network of self-employed relationships. From Uber drivers and Airbnb members to ebay traders, work isn’t what it used to be.
Applying industrial-age tax rules to digital age businesses presents big problems but we rarely talk about the difficulty that businesses in general, and digital businesses in particular, have in interpreting those rules to calculate the right amount of tax.
The BEPS Digital Economy Report provides a good summary of how the international tax system was developed and why the digital economy causes tensions. It endorsed the view that we don’t need new digital taxes, but we do need an international tax system fit for the digital age.
As competition for online consumers intensifies, new digital routes to market, distribution channels and payment mechanisms will evolve. This is good for businesses getting their products to market, but tricky regarding the associated VAT and other indirect tax obligations.
In an ideal world of the future, we won’t have to worry about the role played by digital communications technology in business, but we will have a new agreement between states as to how profits should be shared between them. John Steveni speculates about the future of international tax.
For the digital aspects of publishing, tax is important to content sourcing and customer supply. Now is the time for publishers to take a good look at how tax fits in with their supply chain strategy and change management.
With the birth and explosion of ecommerce, is location still a consideration for retail? For some aspects, such as taxation, location can still make a difference for digital businesses. The EU is currently tackling the location debate when it comes to VAT (value-added tax) and customs duty on small value consignments.
John Steveni continues his exploration into the impact of the international tax regime for the digital age. One of the biggest issues that will have to be tackled is around the location of income and the virtual nature of business today.
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