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1 Cristina Enache, Digital Taxation around the World 1 (2024)

handle is hein.taxfoundation/digitaltax0001 and id is 1 raw text is: *TAX FOUNDATION Digital Taxation around the World Cristina Enache Senior Economist April 2024 Key Findings • There is a geographic mismatch between the location of individuals who use digital platforms and the location where those products are developed. In 2020, while 40 percent of the value created in information industries originated in North America, 40 percent of global internet users were based in East and Southeast Asia. • The growth of the digital economy in recent decades has been paired with policy debates about the taxes digital companies pay and where they pay them. • In the absence of a multilateral change to tax policies, a significant number of countries adopt- ed unilateral tax measures targeted at digital businesses, including digital services taxes (DSTs), gross-based withholding taxes, and digital permanent establishment rules. • Currently, 18 countries have implemented unilateral DSTs, and Canada will be joining this group soon. • The United States, home of most of the companies impacted by DSTs, plans to eliminate DSTs either though a multilateral agreement or through trade threats and potential trade wars. • The multilateral solution of Amount A from Pillar One creates clear winners and losers, and the United States holds the keys to getting the treaty ratified or not. Nevertheless, even if the treaty gets ratified, it may not result in the removal of all DSTs. • If a multilateral solution is not reached, DSTs will continue to spread, resulting in uncertainty and double taxation. • One hundred and one countries have implemented a value-added tax (VAT) or goods and services tax (GST) on cross-border online sales. In the EU, VAT revenues collected from these measures increased sevenfold in seven years, between 2015 and 2022. Additionally, the maximum revenue potential of a VAT on e-commerce is 2.5 times higher than that of tariffs at the current rates. • Instead of utilizing these distortionary taxes, countries should expand consumption taxes to in- clude digital services and products, achieving a neutral broadening of the tax base. The Tax Foundation is the world's leading independent tax policy 501(c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 | taxfoundation.org

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