Taxation on the Digital Economy ―Issues on Implementation and Enforcement―

The consideration of a tax system on the digital economy involves challenges related to implementation, such as how to calculate and allocate profits attributable to market countries, and challenges related to enforcement, such as ensuring appropriate tax declaration and payment, avoiding excessive compliance cost, and preventing and eliminating double taxation. New rules should adequately take into consideration the following issues concerning implementation and enforcement. The first issue is the clarity of the requirements regarding the methods of calculating and allocating attributable profits. The second issue is the need for effective systems to require registration in market countries and for information sharing among the tax authorities to ensure appropriate tax declaration and payment, and avoid excessive compliance cost. The third issue is the need to foster an international consensus to allocate profits and develop an effective multilateral framework of dispute settlement. It is required to hold sufficient discussions on how to tax the ever-growing digital economy, which is the issue that significantly affects the future direction of the international tax system.