This thesis investigates the various actions presented in the “Action Plan on Base Erosion and Profit Shifting” and their applicability to companies operating in the digital economy. Besides the actions stated in the Organisation for Economic Co-operation and Development’s (OECD) Action Plan other measures against BEPS that can be found in recent literature are analysed and compared.
Furthermore, it is examined whether these actions are suitable for preventing tax evasion of ebusinesses acting on a cross-border level. Both, indirect and direct taxation, as well as the concept of permanent establishment (PE) in the context of the digital economy are considered and analysed in this paper. The paper focuses mainly on the taxation of cross-border business transactions in the context of e-business.
However, the thesis does not examine the situations of specific countries but primarily utilises a general view on the actions without regional limitations. Taxation of bricks and mortar businesses are not specifically considered, though, parallels to the digital economy may be drawn throughout the thesis.
Table of Contents
1. Introduction
1.1. Problem Definition
1.2. Aims and Non-Aims
1.3. Methodology and Structure
1.4. Definitions of Technical Terms
1.4.1. Direct and Indirect Taxes
1.4.2. Permanent Establishment
2. Attributes and Growth of the Digital Economy
2.1. Development and Impact on the Business Environment
2.2. Different Business and Revenue Models in the Digital Economy
2.2.1. E-Commerce
2.2.2. Application Stores
2.2.3. Cloud Computing
2.2.4. Online Advertising
2.3. Overview on the Principal Characteristics of the Digital Economy
3. Concepts of the International Taxation System
3.1. The Role of the OECD in International Taxation
3.2. Principles of International Taxation
3.3. Double Tax Treaties and Taxation of Cross-Border Transactions
4. Challenges of Taxing the Digital Economy
4.1. The Role of PEs in the Digital Economy
4.2. BEPS in Terms of Direct Taxation
4.3. BEPS Relating to Indirect Taxation
5. Evaluation of Countermeasures
5.1. Methods Against Artificial PE Avoidance
5.2. Amendments to Transfer Pricing Rules
5.3. Measures Against Artificially Positioning Income in Low-Tax Jurisdictions
5.4. Actions for the Prevention of BEPS with Regard to Indirect Taxation
6. Discussion
7. Conclusion and Future Outlook
8. References
Research Objectives & Core Themes
The objective of this thesis is to analyze the effectiveness of the measures outlined in the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS) in preventing tax evasion for companies operating within the digital economy. The study evaluates whether current international tax rules, specifically regarding permanent establishment and transfer pricing, are sufficient to address the unique challenges posed by digitized, cross-border business models.
- Analysis of digital business models and their impact on international taxation.
- Evaluation of the OECD's BEPS Action Plan and its specific 15-point agenda.
- Examination of the "Permanent Establishment" (PE) concept in a virtual environment.
- Assessment of direct and indirect taxation challenges in the context of e-commerce and intangible assets.
- Comparison of OECD countermeasures with alternative academic and policy proposals.
Excerpt from the Thesis
1. Introduction
During the last years the level of globalisation has increased substantially and companies conduct business on a worldwide level with a growing number of business activities performed within the digital economy by means of the internet and thus geo graphically distant from the customers (OECD, 2013a, p. 7). With the continuous development of the digital economy, trading opportunities have considerably grown to wards a more interregional and global market which goes along with a reduction of cross-country trade barriers (Johansson, Karlsson, & Stough, 2006, p. 5). This development is fostered by the occurrence of various technologies and new applications, particularly driven by the emergence and continuous improvement of the internet as well as an ever-increasing number of business models (Nellen, 2015, p. 17). New business models and economic activities are mainly facilitated by the utilisation of information and communication technologies (ICT) which leads to a significant reduction of costs on the one hand and on the other hand simultaneously encourages a faster interaction with customers and therefore an improved performance (OECD, 2015a, p. 52). The adoption of ICT within the digital economy conduces to the availability of new products and services as well as an alteration of offerings that are already existent in the market, which gives rise to the establishment of new companies, different competitive situations and thus new structures of the markets (Johansson et al., 2006, p. 4).
Summary of Chapters
1. Introduction: Provides the problem definition, aims, and methodology for analyzing BEPS within the digital economy.
2. Attributes and Growth of the Digital Economy: Examines key digital business models and their characteristics that impact international taxation.
3. Concepts of the International Taxation System: Outlines the fundamental principles of international tax regimes and the role of the OECD.
4. Challenges of Taxing the Digital Economy: Discusses the specific tax complexities arising from the borderless and virtual nature of digital commerce.
5. Evaluation of Countermeasures: Analyzes the effectiveness of the OECD's BEPS action points compared to other academic proposals.
6. Discussion: Synthesizes findings on whether existing PE definitions and BEPS actions adequately solve tax evasion in digital environments.
7. Conclusion and Future Outlook: Summarizes the key findings and suggests areas for future research on global tax harmonization.
Keywords
BEPS, OECD, Digital Economy, Permanent Establishment, Transfer Pricing, International Taxation, Tax Evasion, E-Commerce, Cloud Computing, Base Erosion, Profit Shifting, Intangible Assets, Tax Neutrality, Indirect Taxation, Double Tax Treaties.
Frequently Asked Questions
What is the core focus of this bachelor thesis?
The thesis investigates how companies operating in the digital economy utilize the OECD's BEPS Action Plan to mitigate tax evasion and whether current international tax standards remain valid in a globalized, digital business environment.
Which central themes are explored?
The primary themes include the structural shift toward digital business models, the inadequacy of the "physical presence" or "permanent establishment" concept, and the complexities associated with taxing intangible assets across borders.
What is the primary research question?
The research aims to determine which activities outlined in the OECD Action Plan are most suitable for preventing tax evasion opportunities for companies operating within the digital economy.
Which methodology is applied?
The thesis utilizes a profound literature review of recent journal articles, expert reports, and official OECD documentation to build an interrelated storyline and offer a structured analysis of current international tax situations.
What does the main part cover?
The main part of the paper details the characteristics of the digital economy, analyzes existing international taxation principles, evaluates the specific challenges of taxing digital transactions, and critiques the countermeasures proposed in the OECD BEPS Action Plan.
Which keywords best characterize this research?
Key terms include Base Erosion and Profit Shifting (BEPS), Permanent Establishment (PE), Transfer Pricing, Digital Economy, and International Taxation principles.
Why does the "Permanent Establishment" concept face criticism?
The thesis highlights that the PE concept is rooted in traditional "bricks and mortar" business models, making it difficult to apply to digital businesses that generate revenue in a country without maintaining any physical local branch.
What alternative approaches to taxation are discussed?
The thesis examines alternatives such as a new "digital nexus" based on user engagement or revenue thresholds, as well as proposals for a destination-based "corporate cash flow tax" and global unitary taxation.
- Quote paper
- Melanie Keller (Author), 2016, An Analysis of Actions of the OECD Action Plan on BEPS in the Digital Economy, Munich, GRIN Verlag, https://www.grin.com/document/352842
