Taxing the Digital Economy: Yes, That (Probably) Means You

As the European Commission (EC) and the OECD have rolled out new proposals to tax digital transactions, tax leaders who don’t happen to work for one of the “digital giants” have remained largely unfazed so far. Surely, it’s only those famous Silicon Valley-based companies that these new approaches – especially the EC’s proposed changes – will impact, right? Well … yes and no (and please don’t call me “Shirley”).

Vertex Chief Tax Officer Michael Bernard and Executive Vice President John Viglione reflect on the impacts of the evolving digital taxation landscape in a new article, “The Taxing Nature of the Digital Economy.” “While the digital economy taxation proposals put forward by the OECD and the EC would clearly affect US tech giants, the impact of these measures would extend well beyond this small group of companies if adopted,” they write. What’s more, “these changes will affect more and more companies as they undergo digital transformations and derive even greater value from their data assets and digital transactions.”

Michael and John offer a concise overview of the EC’s and OECD’s moves, along with a discussion of which companies these changes will affect, and why. Tax authorities will face difficulty in limiting repercussions on the economy at large, they argue – and that leaves corporate tax leaders no room for complacency. The management of tax data will be more important than ever as jurisdictions roll out new remittance and reporting obligations. Companies should take a close look at the improved governance control and risk management that technology can provide.

The article also looks at how the rise of digital taxation affects corporate tax planning for both the immediate and long-term future – a theme I’ll pick up in my next post.