The spread of the digital economy brings about many benefits, for example in terms of growth, employment and well-being more generally. At the same time, it gives rise to a number of challenges for policymakers.
These challenges extend well beyond domestic and international tax policy and touch upon areas such as international privacy law and data protection, as well as accounting and regulation.
- The continual increase in the potential of digital technologies and the reduced need in many cases for extensive physical presence in order to carry on business in a jurisdiction, combined with the increasing role of network effects generated by customer interactions, raise questions as to whether rules that rely on physical presence continue to be appropriate.
- Cross-border trade in goods, services, and intangibles creates challenges for VAT collection, particularly where such products are acquired by private consumers from suppliers abroad.
- The development of new business models raises questions regarding the characterisation of income.
- Increasing reliance on data collection and analysis and the growing importance of multi-sided business models raise questions about the valuation of data, nexus, and profit attribution, as well as characterization.
Following are the steps are taken in this direction-
- BEPS report
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- The Task Force on Digital Economy at the OECD mentioned three measures
- an equalization levy
- withholding taxes
- New nexus rule
- The first two are taxes on the gross turnover whereas the new nexus rule was to modify the taxable nexus beyond the physical presence in a country.
- The Task Force on Digital Economy at the OECD mentioned three measures
2. Equalization levy
-
- These would apply to a wide range of digital services.
- The potential ramifications of these taxes could be over-taxation or a pass-through of costs to consumers. Such measures can give market jurisdictions greater power to tax.
3. Economic presence
-
- In 2018, India proposed its long term solution to the problem — test for significant economic presence.
- The amendment was based firmly on the understanding that if a digital platform reported sales from a country or had a significant number of users it should be considered as having a taxable presence in that jurisdiction.
Consensus must be evaluated in light of the misalignment of economic interests between developing and developed countries. A good tax system must have the axes of certainty, simplicity, and neutrality. An alternative may be to switch to a simpler withholding tax architecture.
Comments
32 responses to “What are the challenges in taxing digital spaces? What steps are taken in this direction? (15 Marks)”
MOJO9930Q00N64198657
No need to give subheadings for the intro.
After intro, briefly give the status of the growth in the digital space. Then start your main body.
Underline your important points.
Your points are very good.
They are deep, well discussed and explained and they are informative.
But understand the difference between way forward and conclusion. Both are very different things,
Way forwards means what are the steps needed. The conclusion is your concluding remarks for the whole answer.
The language in the answer is superb.
Payment id : MOJ09a31D00D58068663
There are issues with the depth of the content and the structure of the answer.
The main body should have detailed discussions on the difficulty in taxing the digital space. You have given points (Which are very good) but the explanation is needed at each point. Otherwise, there is no content in those points.
Similarly, in way forwards you need to give more points.
In terms of structure, challenges in creating new tax regime needs to be discussed in the 1st part. Whenever you are discussing the way forward, then you are approaching the end of the discussion. Hence, there is no need to start a new subheading after the way forward. After way forward, naturally, your conclusion should come.
Good conclusion
MOJO9b02200D52463423
Your intro should always have a link with the upcoming discussion in the main body. Hence, after the intro, add one line “But taxing these giants in digital spaces is a bone of contention in various parts of the world.” This way, you have connected your intro with the main demand of the question.
Understand the difference between the way forward and the conclusion. Both are very different things,
Way forwards means what are the steps needed. The conclusion is your concluding remarks for the whole answer.
Also, you do not need to put subheadings for the intro or conclusion.
The main body of the answer is decent.
But work on your presentation. Underline imp points
Please Review…My payment id: MOJO9a31400N58094558
There is no need for the subheadings in intro and conclusion.
The intro is very large. Avoid large paragraphs in any part of the answer. The intro should ideally be completed in couple of statements.
The 1st part of the answer needs more content. You gave only two points regarding the challenges in taxing tech spaces.
The 2nd part is very good.
Good conclusion.
Work on your presentation
MOJO9a29V00D61774546
Thanks.
After intro, briefly give the status of the growth in the digital space. Then start your main body.
Good content in the main body.
Decent way forwards.
Content-wise, the answer is good.
Presentation can be made better though. Do not make your statements look like shorth hands or rough notes. This problem arises in the bullet points.
MOJO9b04X00D25275001
After intro, briefly give the status of the growth in the digital space. Then start your main body.
Highlight your subheadings and underline important points in your answers.
Points are good but do not over-explain. Also, write smaller statements.
That way, your points will be crisp and the presentation will be much better.
Structure is decent
MOJO9B03K00A07920521
After intro, briefly give the status of the growth in the digital space. Then start your main body.
Points in the main body are decent but they need to be expanded a bit more in order to make the content deep.
More content in the way forward is needed.
The overall answer lacks depth and hence, more content in the main body is needed.
Remember, that in 15 marks question, you will be getting 2 pages. Hence use your full quota of space
Payment I’d. MOJO9a31100A58098507
Very good answer.
It has all the elements covered.
The structure, content, and presentation are apt.
The points are well explained.
Language is superb.
All in all, near-perfect attempt
MOJO9b04S00N25297271. Please review
After intro, briefly give the status of the growth in the digital space. Then start your main body.
Overall, the content is very good.
But do not overexplain or use large statements. It makes the content bulky.
The presentation is good and the language is fine.
The depth and coverage of the points are decent.
Payment ID:MOJO9b01O00A90839766
Please review
After intro, briefly give the status of the growth in the digital space. Then start your main body.
The rest of the answer is fine.
The structure is superb.
The points are well placed and they are crisp.
Good conclusion
MOJO9903H00A58015579
Very good intro.
Overall, the content is good.
But avoid large statements.
They make the points over-explained.
Though you have a good knack of keeping things under control, but sometimes it may affect the length of your answers.
All in all, the structure and the presentation of the answer are very good.
Superb way forward.
My ID: MOJO9a31600N5807768
Please upload clear images.
Underline the important points.
The content is very good.
You have covered almost all the necessary elements required in the answer.
Good language.
The presentation is also good.
Payment ID
MOJO9b01C00A90817216
Please review.
Hi Paran
Welcome to the AWE Program
Very good intro.
After intro, briefly give the status of the growth in the digital space. Then start your main body.
The overall structure is decent in the answer.
But you add a couple of more points in each subheading.
That way, your depth of the answer will be increased.
The language is very good.
Excellent conclusion
MOJO9a25MOON56192840
A very good and detailed answer Ankit.
The structure is perfect in the answer.
Presentation can be improved here. Keep the subheadings a little more distinctive and properly highlighted. Also, give some space while changing the discussion between two separate subheadings.
Coming to the content, the answer is near perfect in terms of the required depth and the coverage.
The explanation is short and crisp.
The points are well placed and the flow is coherent to the demand of the question.
Well attempted, overall.
MOJO9a05K00A19952476
A very good intro.
The content is very good.
Your coverage has almost all the necessary elements required in the answer.
It is deep and wide.
Good language.
The explanation is done in a decent manner.
The presentation is also good. It is clean and well structured.
Good handwriting.
The subheadings are apt and way ahead is fine.
MOJO9a02U00D28381180
The answer lacks depth.
The content needs to be according to the demand as well as the marks allotted to the question, i.e. 15 Marks.
Hence your content should reflect that dimension.
Your intro is fine.
In the 1st part, give more regarding the issues in taxing digital spaces.
Similarly, in the last part, gove more steps taken by various nations and agencies.
The last part mentioned the word “Digital Currency”. This alters the whole dimension and hence avoid such general keywords or statements. The issue is related to the overall digital space. Hence do not use words loosely.
Read the model answers for the missing talking points