Foreword

Digitalization affects the entire global economy. The impact of this new technological
wave can neither be ring-fenced to specific sectors of the economy nor be circum-
scribed to specific countries or regions. As a consequence, the use of new digital
­technology has not only transformed traditional business models but has also
enabled the appearance of new digital-based business models that pose challenges to
how economies have traditionally been taxed. A major breakthrough has been the
ability to conduct business activities in a territory without having a physical presence
there; in addition, the increasing reliance on intangibles has made it more difficult to
differentiate value across different business functions, risks, and assets.
Altogether, digitalization has contributed to a new borderless world economy,
which, in turn, has brought to the fore how increased world trade affects the ability of
country governments to tax economic activities to fund public priorities. Increased
international digital trade has put in check established tax rules, and they need to be
updated. In the absence of an international digital tax system and a global tax authority,
the digital debate demands multilateral cooperation mechanisms and compromise
from all parties involved—mainly from digital producer and consumer countries but
also from multinational corporations in the digital services sector. Unless a coordinated
global solution is reached, a proliferation of unilateral tax measures could fuel trade
wars and negatively affect investment decisions, both cross-border and domestically.
The 2015 Addis Ababa Action Agenda on Financing for Development emphasized
“the importance of inclusive cooperation and dialogue among national tax authorities
on international tax matters” to support achievement of the Sustainable Development
Goals. This effort is especially relevant in the midst of the COVID-19 pandemic crisis,
Copyright © 2021. World Bank Publications. All rights reserved.

when countries are facing an unprecedented fiscal deficit and online commerce is soar-
ing worldwide. Taxation of the digital economy could be an important measure for
governments to generate new fiscal space and increase tax revenues. However, taxing
the digital economy is particularly challenging in countries with low tax administration
capacity. Special attention should be given to the tax administration dimension, which
is largely dismissed by most international tax practitioners. Digital technology has the
potential to transform tax administration and its interaction with taxpayers.
The World Bank recognizes that the digital economy, as a driver of growth and inno-
vation, can help to accelerate the achievement of the World Bank Group’s twin goals.
For example, the World Bank Group Digital Economy for Africa (DE4A) flagship

ix

Lucas-Mas, Cristian Óliver, and Raúl Félix Junquera-Varela. Tax Theory Applied to the Digital Economy : A Proposal for a Digital Data Tax and a Global
Internet Tax Agency, World Bank Publications, 2021. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/indonesiau-ebooks/detail.action?docID=6503996.
Created from indonesiau-ebooks on 2023-03-06 04:30:32.
 Foreword

i­ nitiative, together with other development partners and sector stakeholders, supports
the transformation strategy for Africa that has been prepared by the African Union: to
achieve the All Africa Digital Transformation vision. But digitalization must also ensure,
as envisioned in the Addis Ababa Action Agenda, that “all companies, including multi-
nationals, pay taxes to the governments of countries where economic activity occurs
and value is created, in accordance with national and international laws and policies.”
To this end, the Macroeconomics, Trade, and Investment (MTI) Global Practice leads
the World Bank Group’s dialogue and engagement with clients in macroeconomics, fis-
cal policy, and trade and conducts cutting-edge and innovative research in the area of
taxation of the digital economy. This publication is a product of the Global Tax Program
(GTP) in the Fiscal Policy and Sustainable Growth Unit (FPSG).
The book analyzes the distinctive features of the digital economy and their tax
impact. After identifying the tax-disruptive aspects of digital business models, the
authors review existing tax initiatives in light of traditional tax theory principles and
discuss a comprehensive solution that is mindful of the foundations of tax theory. In
this vein, the book proposes establishing a digital data tax (DDT) that could become a
significant source of tax revenues for market jurisdictions while respecting tax theory
principles. It also proposes creating a new global internet tax agency (GITA) under the
auspices of the United Nations that would provide technical assistance and help to
solve disputes around taxing the digital economy.
This is a technical piece, with a fresh view that contributes new ideas and original
thinking to a thorny subject. The authors, well known by academics and development
professionals, propose a new paradigm for digital taxation—one that would continue to
benefit from a collaborative and open intellectual debate. I hope that the contents of
this book will foster additional debate among all stakeholders and help to advance the
digital taxation agenda.

Marcello Estevão
Global Director, Macroeconomics, Trade, and Investment
World Bank Group
Copyright © 2021. World Bank Publications. All rights reserved.

Lucas-Mas, Cristian Óliver, and Raúl Félix Junquera-Varela. Tax Theory Applied to the Digital Economy : A Proposal for a Digital Data Tax and a Global
Internet Tax Agency, World Bank Publications, 2021. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/indonesiau-ebooks/detail.action?docID=6503996.
Created from indonesiau-ebooks on 2023-03-06 04:30:32.