How to Tax the Digital Economy | DAVOS 2020

TL;DR

Governments worldwide are losing billions of dollars in tax revenue due to outdated tax rules for multinational companies, especially in the digital sector. A new plan has been proposed to address this issue, which involves changing taxation for digital companies and setting a minimum corporate tax rate for all countries.

Transcript

I have to say that unfortunately one of the most powerful organizations law firms and consulting firms are of course helping multinationals to avoid taxes and we know that the borderline to evasion of taxes is sort of blurred and not participating in that and I think just because it's basically a white-collar business should not stop us from thinki... Read More

Key Insights

• 🚕 The current tax rules for multinational companies are outdated and unable to effectively address the challenges posed by the digital economy.
• 👶 A new global agreement is needed to ensure that companies pay their fair share of taxes and prevent tax evasion and avoidance.
• 🚕 The proposed plan involves changing tax rules for digital companies and setting a minimum corporate tax rate for all countries.
• 👶 Implementation and enforcement of the new rules will be crucial to ensuring transparency and fairness in the global tax system.
• 👋 The issues surrounding taxing digital companies go beyond taxation and include concerns about sustainability, good governance, and fairness in the global economy.
• 🖐️ Gatekeepers such as accounting firms and lawyers play a role in facilitating tax avoidance, and their involvement needs to be addressed.
• 🤑 Trust in the tax system is crucial, and the current situation, where the richest companies pay very little taxes, undermines that trust.
• 🤽 The proposed plan aims to address the concerns of both developed and developing countries and create a level playing field in the global tax system.
• 🌱 The success of the plan will depend on the commitment and cooperation of all stakeholders involved, including governments, companies, and international organizations.

Questions & Answers

Q: What is the proposed plan to tackle tax evasion by digital companies?

The plan involves changing the tax rules for digital companies and setting a minimum corporate tax rate for all countries. It aims to address the challenges posed by the digital economy and ensure that companies pay their fair share of taxes.

Q: What are the key issues in taxing digital companies?

The key issues include determining where companies should be taxed, as they can operate globally without a physical presence in a specific country. It is also important to establish new rules to address the digital economy's challenges and prevent tax evasion and avoidance.

Q: Is tax evasion by digital companies a corruption issue?

Tax evasion by digital companies can be seen as a form of corruption, as some companies exploit existing tax laws to avoid paying their fair share of taxes. The use of offshore jurisdictions and shell companies further emphasizes the need for transparency and good governance in the global economy.

Q: How will the proposed plan address the concerns of developing countries?

The proposed plan aims to ensure that companies pay taxes in the countries where they generate profits, regardless of their country of origin. This will provide a more transparent and fair tax system, allowing developing countries to collect the taxes they are owed and utilize them for sustainable development.

Summary & Key Takeaways

• Tax rules for multinational companies need to be updated to address the challenges posed by the digital economy.

• A new plan involving 137 countries has been proposed to tackle tax evasion by digital companies and set a minimum corporate tax rate for all countries.

• The rise of digital giants has made it difficult for countries to collect their fair share of taxes, leading to a loss of hundreds of billions of dollars in tax revenue.