Watch: Taxing the Digital Economy

June 3, 2020

The digitalization of the economy has led more companies to adopt virtual operations, disrupting traditional means of consumption and income taxation. This has led to a heated debate on how best to tax the digital economy.

Despite the OECD stepping in to negotiate a global framework, some countries have taken unilateral action, implementing problematic digital services taxes (DSTs). Where is this debate headed and what does our research indicate is the best path for policymakers to pursue?

In our latest tax discussion, Tax Foundation President Scott Hodge and Vice President of Global Projects Daniel Bunn addresses these questions and more:

  • What changed in the global economy that disrupted traditional means of taxation? Is it worth finding a way to include tax digital goods and services in the tax base?
  • Where is the OECD in its process and what policies is it considering? What’s the significance of the EC renewing its commitment to pursuing a DST last week? What unilateral actions have already been taken across the world?
  • Why are DSTs so problematic? Are there better options—ways to adapt our current system without introducing complex and economically harmful policies?
  • What’s the risk of the OECD being unable to negotiate an agreement? What’s the risk of the process resulting in new and harmful taxes, especially in the context of post-COVID-19 economic recovery?

For more information on digital taxation and what it means for tax policy across the country and throughout the world, visit our digital tax resource center, which is updated regularly.

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.