THE UNCTAD latest Report has observed that the rapid digitalization of economic activity is changing how value is created, measured and distributed, adding new challenges to the international tax framework. Mitigating serious fiscal leakages requires a fresh examination of existing international corporate tax norms and rules to determine which jurisdiction has taxing rights, the treatment of cross-border transaction between the different entities of an MNE and the measurement of value creation when intangible assets and the users of data become a significant source of value. The report maintains that fair taxing rights in a digital economy requires using the concept of significant economic presence in terms of revenue from sales or transactions that exceed certain levels.

While waiting for international consensus on this matter, such as from ongoing negotiations in the OECD/G20-led Base Erosion and Profit Shifting (BEPS) project, several developed and developing countries have explored temporary unilateral domestic tax measures for the digital economy. One example is the excise tax, equalization tax or levy that several countries (many of which are European Union members) have considered or started to apply. A simple estimation of potential additional tax revenues from such unilateral measures ranges between $11 billion and $28 billion for developing countries alone. Similarly, while consensus at the World Trade Organization has not been reached, terminating the moratorium on custom duties on electronic transmissions could provide additional fiscal revenue of more than $10 billion globally, 95% of which would go to developing countries.