White Paper Corporate Tax, Digitalization and Globalization

The document analyzes how digital business models, characterized by remote presence and heavy reliance on intangible assets, render early 20th-century tax principles obsolete. It details the OECD/G20 Inclusive Framework's proposals to redistribute taxing rights to market jurisdictions (Pillar 1) and implement a global minimum tax to curb base erosion and profit shifting (Pillar 2). The paper also highlights the perspectives of developing countries, who often favor supply-side factors in profit allocation, and the concerns of multinational enterprises regarding tax certainty and double taxation.

• Digitalization allows companies to achieve "scale without mass," meaning they can engage significantly with a country's economy and users without maintaining a physical "permanent establishment," which is the traditional requirement for a source country to tax business profits.
• The "arm’s length principle" (ALP), used to value transactions between related entities in an MNE group, is difficult to apply to unique intangible assets like algorithms and software because comparable independent prices often do not exist, leading to potential manipulation and disputes.
• Base erosion and profit shifting (BEPS) occurs when multinational enterprises use complex arrangements to shift taxable income to low-tax jurisdictions, with estimated annual global tax revenue losses ranging from $100 billion to $650 billion.
• Pillar 1 of the OECD/G20 Inclusive Framework proposes "Revised nexus and profit allocation rules" to create a "new taxing right" that redistributes taxing rights toward market jurisdictions regardless of a company's physical presence.
• The OECD Secretariat's "Unified Approach" for Pillar 1 suggests a three-tiered income calculation: Amount A (a fixed percentage of residual profits based on sales), Amount B (fixed returns for marketing and distribution in jurisdictions with physical presence), and Amount C (justified additional profits).
• Pillar 2, the "global anti-base erosion proposal" (GloBE), aims to introduce a global minimum tax system to prevent firms from shifting profits to low or no-tax jurisdictions.
• A global minimum tax may negatively impact developing countries by reducing their ability to attract foreign direct investment (FDI) through preferential tax regimes, potentially shifting taxing rights to the residence countries of MNEs.
• The UN Subcommittee expresses concern that user-based tax models (demand-side) may disadvantage smaller developing economies that rely more on exports and production (supply-side) than on large domestic consumer markets.
• Multinational enterprises (MNEs) prioritize tax certainty, simplicity, and the avoidance of double taxation, often preferring a multilateral consensus over the rising trend of unilateral digital services taxes.
• Civil society organizations and trade unions advocate for greater transparency, such as public country-by-country reporting, and favor unitary taxation approaches to combat aggressive tax planning.

APA

World Economic Forum (2019). White Paper Corporate Tax, Digitalization and Globalization. http://www3.weforum.org/docs/WEF_Corporate_Tax_Digitalization_and_Globalization.pdf

Chicago

World Economic Forum. White Paper Corporate Tax, Digitalization and Globalization. 2019. http://www3.weforum.org/docs/WEF_Corporate_Tax_Digitalization_and_Globalization.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=White Paper Corporate Tax, Digitalization and Globalization |date=December 2019 |url=http://www3.weforum.org/docs/WEF_Corporate_Tax_Digitalization_and_Globalization.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2019white, author = {{World Economic Forum}}, title = {{White Paper Corporate Tax, Digitalization and Globalization}}, institution = {World Economic Forum}, year = {2019}, month = dec, url = {http://www3.weforum.org/docs/WEF_Corporate_Tax_Digitalization_and_Globalization.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }