Volume 46 (2018) / Issue 8/9

Adolfo Martín Jiménez, 'BEPS, the Digital(ized) Economy and the Taxation of Services and Royalties' (2018) 46 Intertax, Issue 8/9, pp. 620–638


The BEPS project has left untouched very relevant opportunities for base erosion and profit shifting, mainly with payments for services and royalties, by MNE groups or even smaller enterprises. It is surprising that the debate about the digital or digitalized economy focuses so much on solutions (the concept of PE based on significant digital economic presence, withholding taxes for digital provision of services or goods or equalization levies) that do not contribute significantly to end up the base erosion and profit shifting opportunities that the BEPS project did not consider, is concentrating on solutions that will not be very helpful in fully aligning tax bases and economic activity and even abandons the BEPS already agreed standards to create a high degree of uncertainty and fragmentation. The article explains why the solutions proposed in the current debate on Action 1 BEPS are insufficient or disproportionate (they may be more political patches than effective remedies), and why more attention should be paid to a more evolutionary approach of the already BEPS agreed principles and standards or the traditional thresholds for taxing business profits, including the UN MC as it is evolving. A more robust international tax order will require to ponder more carefully if already known and agreed principles (including some BEPS outcomes within them), as they can evolve, will be better options to permit ‘market states’ to tax economic activity and will create less uncertainty than the revolutionary solutions proposed in the debates on Action 1 BEPS or unilaterally by the EU or some States.

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ISSN: 0165-2826
ID: TAXI2018067