International Tax Administration In The Context Of Digital Economy

With the innovation and upgrading of information and communication technologies(ICT)in recent years,the influences of digital technologies are felt at every aspect of social development.Digital economy has transformed the way in which economy and society operate as well as people's way of thinking at a more breath-taking speed than the knowledge economy,thus dealing a heavy blow to the traditional international taxation rules and system.In the context of traditional business model,commercial activities generally have easily identifiable trails of transaction,such as situs of wealth,place of performance,and place of residence.These factors can help determine the nature and source of income,which in turn help determine which country has the jurisdiction to tax.Then appropriate methods shall be adopted to attribute the profits,and international tax disputes,double taxation and double non-taxation be avoided by applying the existing DTAs.In the context of digital economy,however,transactions are digital,virtual and hidden,and payments are made electronically.These characteristics have made it difficult to determine the place of transaction,and consumption of goods and services.The difficulty in identifying the nature and source of income has made determination of jurisdiction to tax and attribution of profits more complex.Even more noteworthy is that MNEs can avoid physical presence in the source country with the help of digitized products or online transaction,so as to evade or avoid taxes internationally.In international taxation,legal framework that were built on traditional business model is lagging behind the current development,and international tax rules are increasingly inconsistent with the development of digital economy.This has brought about new challenges to tax administrations.Digital economy has overarching impacts on existing tax systems,ranging from components of tax system(such as subject of taxation,object of taxation,place of taxation,stage of taxation and legal responsibility)to allocation of tax jurisdictions,and from existing administrative system to transfer pricing aspects.In practice,international tax disputes as a result of the digital economy center around non-residents and transfer pricing,which remain the pressing concerns of international taxation.This paper examines some typical cross-border cases from the perspective of international tax manager,and identifies problems with existing administration of non-residents and VAT and offers some recommendations for international tax administration in the era of digital economy based on OECD experts recommendations and BEPS research findings.