Taxation of digital corporations: options for reforms
Olena Sokolovska, Sergei Belozyorov
Available Online January 2019.
- https://doi.org/10.2991/sicni-18.2019.48How to use a DOI?
- digital corporations, corporate income tax, digital tax, BEPS, profitability, corporate tax rate, new industrialization, correlation analysis
- Currently the new industrialization and digitalization of economies leads to the new tax challenges as a result of appearance of new business models, which do not need physical presence to carry out digital transactions. These challenges are generally related to the erosion of tax base and shifting profits by companies, operating in different jurisdictions due to different direct tax regimes. The OECD countries elaborated guidelines (BEPS Project), aimed to address tax avoidance strategies of corporations. Now EU Member States actively discuss the introduction of digital tax, aimed primarily to increase an effective income tax rate faced by digital corporations in order to reduce the gap in profitability between “brick-and-mortar” and digital companies. Recent research showed that there is no systematic difference in effective income tax rate faced by digital corporations compared to traditional ones, and therefore, the underlying proposition in the discussion about taxing digital firms in EU is misguided. We provide an empirical analysis of relationship between profitability of digital corporations and their effective tax liabilities. .We exclude big Japanese digital corporations since features of Japanese digital taxation influence essentially on their performance indicators. The results demonstrate that tax expenses of digital corporations, as contrast to effective corporate tax rate, can have an impact of their profitability, measured as after tax profit margin ratio, and whether the digital tax has an impact, depends on its design, notably, availability of tax incentives and exemptions, and the progressivity of tax rate.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - Olena Sokolovska AU - Sergei Belozyorov PY - 2019/01 DA - 2019/01 TI - Taxation of digital corporations: options for reforms BT - Proceedings of the 2nd International Scientific conference on New Industrialization: Global, national, regional dimension (SICNI 2018) PB - Atlantis Press SP - 236 EP - 241 SN - 2352-5398 UR - https://doi.org/10.2991/sicni-18.2019.48 DO - https://doi.org/10.2991/sicni-18.2019.48 ID - Sokolovska2019/01 ER -