Taxation, Data and Destination

Book Overview

Taxation, Data and Destination' examines two destination-based corporate tax frameworks, exploring their implementation across various digitalized business models, and assessing their compliance with tax and data protection legal frameworks.

In addition, it examines the broader context of digital activities and their impact on taxation, including the evolving nature of digital tax measures and the ongoing global discussions surrounding the taxation of digital activities.

Key Themes and Topics

The surge of digitalization in the global economy raises multiple new legal questions. International corporate taxation is encountering situations it has never had to consider before now, being traditionally based on a physical nexus of businesses in their States of residence or original source. Over the past years and as part of the BEPS project, the OECD and its “Inclusive Framework” of 140 countries thoroughly discussed potential adjustments to existing tax rules to align with the economic realities of digitalized business models, including the introduction of a digital services tax to address the profits and value created by digital companies.

This book adds to the ongoing discussion by exploring two models of destination-based corporate taxation. It investigates their relevance to various digital business models, assessing their alignment with both EU and international tax laws, as well as data protection frameworks. First, it offers a thorough analysis of the "destination-based cash-flow tax" model, which economists had proposed long before discussions on taxing digital businesses gained prominence. Additionally, the author presents a "digitalized destination-based corporate tax" model, intended to replace corporate income tax for qualifying taxpayers, blending aspects of digital services taxes with traditional corporate income tax principles.

This book offers a legal analysis evaluating the compatibility of the two tax models with international and EU frameworks. It examines their alignment with double taxation treaties, particularly under the OECD and UN Model Conventions, as well as EU fundamental freedoms, state aid rules, relevant secondary EU legislation, and WTO regulations. Additionally, the author explores whether establishing a corporate tax nexus based on the location of a taxpayer’s users or clients complies with the EU Charter of Fundamental Rights, the European Convention on Human Rights, and the General Data Protection Regulation (GDPR).

Key insights from this work revolve around the viability of destination-based taxation as a resolution for tax challenges arising from digitalized business models, as well as the precise definition of “destination” within this context. Additionally, the new proposed digitalized destination-based corporate tax comes as a compromise between more radical approaches. This tax model can be adopted in compliance with the analyzed legal frameworks, where taxation source rules remain linked to the user’s residence rather than more precise locational data.

This book is a timely study on tax and digitalization and helps readers gain a deeper understanding of the nuances and intricacies that apply when confronting the challenges associated tax, data and destination.