TOWARD A BIG BANG FOR THE TAXATION OF THE DIGITALIZED ECONOMY: A BUSINESS RETROSPECTIVE, PERSPECTIVE, AND PROSPECTIVE

This article examines how various tax policy changes being announced, proposed, or implemented in various countries affect business models that run on digital platforms. These include digital services taxes (DST), international corporate tax, value-added tax (VAT), or goods and services tax (GST) reforms towards taxing the income that arises out of cross border flow of user data or towards the income that arises out of the trade of digital goods and services. This research seeks to understand how the covid-19 pandemic affects cross-border digital services and how tax policy changes in different countries affect business operations and decisions made by companies to respond to such changes. The G7, the G20, and the OECD recently came to a proper conclusion while discussing potential issues arising from taxing the digital economy. The discussions yielded two proposals that aim to globally tax the digitalization of the economy and market — in the form of the Base Erosion and Profit Shifting project “Two-Pillar” solution agreed by 136 countries on October 8, 2021. This article explains and analyzes the relevance of these proposals and proposes certain changes in these tax policies to advise better, more coherent digital tax policy, which governments can apply to ensure that a fair tax regime is implemented more uniformly as compared to the status quo where countries are unilaterally implementing digital tax policies through changes in their domestic regulations. © 2022 by the Virginia Tax Review Association.