The digital economy and online advertising services: policy approaches and case law analysis

Abstract

As we move into 2019, many of the issues that dominated international tax policy debates in 2018 remain unsettled. One of the hottest issues is how to effectively and fairly tax the digital economy — a topic that only becomes more important with the passage of time. At first glance, questions about digitalization may seem quite narrow. In reality, however, the debate encompasses some fundamental principles of cross-border taxation, including questions about the fair treatment of developing and developed countries and how those concerns inform the key concepts underlying the international tax system such as source and nexus. The unique characteristics of digitalized transactions mean that developed countries are suddenly facing concerns previously confined to the developing world, forcing these concerns — previously the domain of the U.N. — onto the agenda of the OECD, EU, and individual jurisdictions worldwide. The debate regarding taxing digital goods and services includes several subtopics that inform the larger policy questions. One of the most notable of these topics is the taxation of digital advertising services. Looking at case studies about this issue helps clarify the complexities involved in the debate about taxing digitalized businesses and gives rise to some potential solutions, at least for the near term.