The development of new technologies has encouraged the creation and development of digital services. E-commerce services, online advertising, social networks have all been born from the development of new technologies. But these new creations have made many of the laws regarding trade, taxation, and competition obsolete. Today, a company or entrepreneur can be physically located in one country, manage business activities in another country, and place employees in a third country. The place of operation is therefore very complex to define, along with the taxation policy. New paid services are also emerging, further complicating the current situation.
In order to remedy this, we must take into account the new constraints that are arising from the development of technologies and adopt a new tax system to replace the obsolete ones. The current international tax rules allow multinational corporations to pay only corporate income tax where production occurs instead of where the consumers are located, not subjecting them to corporate income tax in foreign countries. Thus, the Organisation for Economic Co-operation and Development (OECD) has been holding talks with over 130 countries to create a proposal that would require multinational companies to pay some of their income taxes where their customers are located. Moreover, the European Union (EU) is also currently considering a new tax on digital services to make things easier when taxing digital businesses, while the United Nations (UN) is planning on adding new provisions for income from automated digital companies to the UN Model Tax Convention.
In regards to competition, there are also certain areas that need to be reviewed and updated. For example, some larger, financially equipped companies are providing high-quality online services for free, putting less wealthy SMEs or start-ups at a disadvantage. Such actions are killing competition and preventing business development. Thus, it is now more than necessary to update and alter various competition rules and related laws so that companies’ activities can be carried out more equitably.
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