The Challenge of the Digital Economy (eBook)

Francesco Boccia was nominated as President of the Standing Committee of the Italian Chamber of Deputies in April 2013 and has been serving in that capacity ever since. He has been a member of the Italian Parliament since 2008. Before being elected to Parliament, he served as Professor of Territorial Economics at the Carlo Cattaneo University in Varese, Italy, for over a decade.Robert Leonardi is Professor of Political Science at the LUISS University in Rome, Italy, in the Department of Political Science and the School of Government. Between 1991-2010, he taught at the London School of Economics (UK) in the Department of Government and the European Institute. He is the author of a number of volumes on the cohesion policy of the European Union published by Palgrave Macmillan. He was part of the team led by Robert Putnam at Harvard that defined and elaborated the role of social capital as an essential element in determining the institutional performance of regional and local governments.

Preface 6
Acknowledgements 8
Contents 9
Biographies 11
List of Figures 13
List of Table 14
1: Introduction: The Digital Economy and Fiscal Policy in the Age of E-Commerce 15
1.1 The Issues to Be Discussed and the Alternatives That Are Available 15
1.2 Reflections on the Italian Experience 20
1.3 Issues That Have Emerged from the Italian Debate 25
1.3.1 E-Commerce 25
1.3.2 The Markets Related to the Digital Economy 26
1.3.3 Sales Channels in Tourism 27
1.3.4 Online Advertising 29
1.4 Conclusions 30
2: The Damages of Fiscal Competition in Europe and Alternatives to Anarchy 31
2.1 Introduction 31
2.2 What Is Missing Is a European Model 33
2.3 Convergence Is Not Always Positive 34
2.4 We Need a “Grand Design”: Can We Find It in Recent Developments? 35
2.4.1 “Harmful” and “Non-harmful” Tax Competition 36
2.4.2 Countering the Tax Havens 38
2.4.3 The Ineffectiveness of Countering the Use of Tax Havens for Fictitious Activities 40
2.5 Google, Apple and so on … 41
2.6 … And the Digital Economy: Two Possible Solutions 44
2.7 The Digital Tax and the Belated Reactions of Governments 45
2.8 The Organic and Wide-Ranging Solution 48
2.9 The European Common Consolidated Tax Base (CCTB) 50
2.10 What Are the Prospects? 51
3: Base Erosion and Profit Shifting 52
3.1 What BEPS Is and Why It Is Important to Address It 52
3.1.1 The Report “Addressing Base Erosion and Profit Shifting” 53
3.2 The 15-Action BEPS Project: Inclusive and Transparent 54
3.2.1 15 Actions Focus on Three Pillars: Coherence, Substance and Transparency 55
3.2.1.1 Inclusive 57
3.2.1.2 Transparent 58
3.3 Delivery: The BEPS Package for Reform 59
3.3.1 Bridging the Gaps Between Tax Sovereignties with New Coordination Tools (Actions 2–5) 59
3.3.2 Reinforcing Existing International Standards (Actions 6–10) 61
3.3.3 Improving Transparency (Actions 11–13) 62
3.3.4 Balancing the Approach (Action 14) 64
3.3.5 The Overarching Themes of the Digital Economy (Action 15) 64
3.4 Beyond Delivery 65
3.4.1 Implementation 65
3.4.2 Monitoring 66
3.4.3 Technical Follow-Up Work 66
3.5 Concluding Remarks 67
RETRACTED CHAPTER: OECD BEPS: Reconciling Global Trade, Taxation Principles and the Digital Economy 68
5: Federalism, E-Commerce and Public Finance in the USA 82
5.1 Constitutional Issues and Interstate Commerce 82
5.2 Local Government Finance in the USA 84
5.3 Sales and Use Tax Variations 87
5.4 Economic Impact of Uncollected Retail Sales Tax Due to E-Commerce 90
5.5 Lessons for Other Nations 93
6: A Few Ideas for Reforming Internet Taxation 96
6.1 Introduction 96
6.2 The Impact of the Internet 99
6.3 Conclusions: Possible Solutions 104
6.3.1 Recording of Internet Domains 105
6.3.2 Licensing of IP Addresses 106
6.3.3 Online Advertising 107
6.3.4 The Hit Tax 107
7: The Digital Economy and the Tax Regime in the UK 109
7.1 Introduction 109
7.2 The Eroding UK Tax Base and the Challenge of Creating a Level Playing Field 112
7.3 The UK Government’s Response 117
7.4 Where Does the UK Go in the Future? 119
8: Conclusions: Taxation and the Future of the Digital Economy 122
Retraction Note to: OECD BEPS: Reconciling Global Trade, Taxation Principles and the Digital Economy 129
Appendix: “Digital Economy: Facts, Trends and Developments”—EU Commission, Expert Group on Taxation of the Digital Economy 130
A.1 Digital Economy: Facts, Trends and Developments 130
A.1.1 Characteristics of the Digital Economy 130
A.1.1.1 Mobility 131
A.1.1.2 Network Effects 132
A.1.1.3 Importance of Data 133
A.2 Defining and Measuring the Digital Economy 134
A.3 Trends in the Digital Economy 135
A.4 Digital Challenges for the EU 136
A.5 International Taxation in the Digital Economy 137
A.5.1 Principles of Taxation 137
A.5.2 Economic Efficiency in an International Setting 138
A.5.3 Distributional Equity 140
A.5.4 Compliance and Administration 141
A.6 Business Models in the Digital Economy 142
A.6.1 Description of Relevant Digital Business Models 142
A.6.2 Digital Business Models and their Tax Implications 144
A.7 The G20/OECD “BEPS” Project 145
A.7.1 BEPS General 145
A.7.2 BEPS and the Digital Economy 146
Bibliography 148
Index 151