Professor Itai Grinberg of Georgetown University will be giving a seminar on his paper looking at the taxation of the digital economy.

The 'taxation of the digital economy' is currently at the top of the global international tax policymaking agenda. A core claim some European governments are advancing is that user data or user participation in the digital economy justifies a gross tax on digital receipts, new profit attribution criteria, or a special formulary apportionment factor in a future formulary regime targeted specifically at the 'digital economy.' Just a couple years ago the OECD undertook an evaluation of whether the digital economy can (or should) be 'ring-fenced' as part of the BEPS project, and concluded that it neither can be nor should be.


Importantly, concluding that there should be no special rules for the digital economy does not resolve the broader question of whether the international tax system requires reform. The practical reality appears to be that all the largest economies have come to agree either that a) there is something wrong with the taxation of the 'digital economy,' or b) there is something more fundamentally wrong with the structure of the current international tax system given globalisation and technological trends.


This paper is intended as a limited exploration of the second (or third, or fourth) best. It analyses three policy options that have been discussed in general terms in the current global debate. First, I consider whether 'user participation' justifies changing profit allocation results in the digital economy alone. Second, I consider one such comprehensive international tax reform idea, loosely referred to by the moniker 'marketing intangibles.' This idea represents a compromise between the present transfer pricing system and sales or destination-based reforms to the transfer pricing regime. Third, I consider 'minimum effective taxation' ideas.

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