Assessing The Adequacy Of International Taxation Laws In The Era Of Digital Economy
- IJLLR Journal
- 3 days ago
- 1 min read
Gracy Tanwar, National Law University Odisha
ABSTRACT
The digital economy has changed the global economy and raised fundamental challenges about whether the existing structure of international tax can capture the creation of value through digital transactions. Existing tax structures, which are focused on residence, source, and permanent establishment (PE) as bases for taxation, are insufficient to adequately capture the value of digital transactions. People and businesses alike are connected globally from jurisdictions where large multinational enterprises (MNEs) like Google, Amazon, Meta, Netflix, and others derive significant revenue without the same maintenance of a physical presence in the jurisdiction, which has caused extreme base erosion and profit shifting. This paper assesses if existing international taxation laws shaped by the OECD and the UN Model Conventions, the BEPS initiatives, and emerging initiatives such as the OECD Two-Pillar Solution, are adequate to address the issues of the digital economy. This sectors analysis primarily looks at unilateral actions undertaken by India to capture income from the digital economy, such as the Equalisation Levy and a presence through the definition of Significant Economic Presence or SEP, but also raises questions about the doctrinal issues raised by unilateral action, distributive justice concerns, as well comparative approaches to unilateral actions and principal approaches in India and internationally. While the treatment of digital MNEs through unilateral actions by some jurisdictions surprised many, the road towards a digital solutions has made incremental change; however, the existing regime remains inadequate to protect developing countries' interests. In conclusion, we suggest a more equitable, consensus-driven, inclusive framework that upholds source-based taxation and overall integrity in the digital economy.
