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Tax in the digital economy

The lack of international consensus on taxing the digital economy is creating a vacuum of uncertainty. Wendy Nicholls explains what is on the horizon and how you can deal with the implications.

Commerce is increasingly digital. Yet the global tax system is still geared to the needs of a traditional ‘bricks and mortar’ economy. The OECD’s Base Erosion and Profit Sharing (BEPS) Action Plan recognises the need for modernisation and has achieved quite a lot since the issue of its reports in October 2015. However, specific recommendations on digital taxation have been limited and the OECD’s calls for an international consensus on the way forward have been unheeded.

Here, we see how individual countries are filling the vacuum with their own varied set of tax measures, which continues to create uncertainty and heightens the risk and complexity of tax management for multinational enterprises (MNEs). And while it’s the internet giants that the media and tax authorities have in their sights, it’s also small and mid-size MNEs that are likely to bear the brunt of the changes and face the greatest challenges in managing them.

This is an extract from the Business & Management Magazine, Issue 269, November 2018.  

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