Taxing the digital economy

The international tax rules are being reformed to cope with the increasing digitalisation of business. Work is ongoing to reach an international consensus. Meanwhile some countries, including the UK and France, are taking unilateral action.

Some countries want an increased share of tax on the profits of multinational businesses generated from users based in their countries. The Organisation for Economic Cooperation and Development (OECD) is considering global solutions to the problem. The European Commission is considering a digital levy as an interim solution and individual countries, including the UK, France and Spain are taking or threatening unilateral action.

Current international tax rules allow countries to tax profits of non-resident companies which are attributable to a permanent establishment in that country. Transfer pricing rules seek to ensure that a multinational group's profits are divided between the group companies in accordance with each