The Geopolitics of Internet Taxation: Is digitalisation eroding the corporate tax base in Asia?

T H E G E O P O L I T I C S O F O N L I N E TA X A T I O NM A R T I N A F R A N C E S C A F E R R A C A N E R E S E A R C H A S S O C I A T E A T E C I P E

• Neutrality: tax rules should not privilege any form of

commerce over another

• Efficiency: tax rules should minimise administrative

and law-compliance costs

• Effectiveness: tax rules should prevent double

taxation and tax evasion by individuals and firms

P R I N C I P L E S I N I N T E R N A T I O N A L TA X A T I O N

D I G I TA L TA X A T I O N

• Neutrality: discrimination against digital companies

• Efficiency: additional administrative burden and uncertainty

• Effectiveness: exacerbated risks of double taxation

I S T H E R E A P R O B L E M

W I T H O N L I N E TA X A T I O N ?

- Digital MNC do not pay taxes

- Digital trade leads to base erosion

- Governments have to increase personal taxes in

order to compensate for the loss in corporate

taxes

C L A I M S A B O U T D I G I TA L TA X A T I O N





taxes


A V E R A G E E F F E C T I V E TA X R A T E S ( E T R S ) O F L E A D I N G O N L I N E S E R V I C E S

P R O V I D E R S C O M PA R E D T O O T H E R L E A D I N G A S I A - PA C I F I C M N C S ,

F I V E - Y E A R A V E R A G E ( 2 0 1 2 - 2 0 1 6 )

Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation , Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.

0%#

10%#

20%#

30%#

40%#

50%#

60%#

LG#Electronics#(K

orea)#

Airtel#(India)#

Rakuten#(Japan)#

NTT#(Japan)#

Tata#Com

mun

icaF

ons#(Ind

ia)#

BHP#Billiton#(Australia)#

Hon

da#(Japan)#

Toyota#(Japan)#

KT#Corpo

raFon

#(Korea)#

Naver#(K

orea)#

Samart#Group

#(Thailand

)#

Telstra#(Australia)#

Globe

#(Philippine

s)#

Korea#Electric#Pow

er#Corpo

raFon

#(Korea)#

Qantas#(Australia)#

VieRel#M

obile#(V

ietnam

)#

Spark#(New

#Zealand

)#

Hitachi#(Japan)#

SoUbank#Group

#(Japan)#

HM#Sam

poerna#(Ind

onesia)#

OEC

D#Average#Statutory#Tax#Rate#

Telkom

#Indo

nesia#(Ind

onesia)#

China#Unicom#(C

hina)#

Tata#M

otors#(Ind

ia)#

China#Mob

ile#(C

hina)#

China#Telecom#(C

hina)#

Digi#Telecom

mun

icaF

ons#(M

alaysia)#

Indu

strial#and

#Com

mercial#Bank#of#China#(ICB

C)#

China#Co

nstrucFon

#Bank#(China)#

Average#EffecFve#Tax#Rate#of#m

ain#US#Digital#

Samsung#(K

orea)#

Asia#Average#Statutory#Tax#Rate#

Bank#Rakyat#(Ind

onesia)#

SK#Telecom

#(Korea)#

Wilm

ar#InternaF

onal#(Singapo

re)#

Advance#Info#Service#(A

IS)#(Thailand

)#

Tencen

t#(China)#

PLDT#Inc.#(P

hilippine

s)#

Indo

sat#(Ind

onesia)#

Vinam

ilk#(V

ietnam

)#

United#Overseas#Ba

nk#(Singapo

re)#

FPT#Group

#(Vietnam

)#

Singtel#(Singapore)#

Alibaba#(China)#

Telekom#M

alaysia#

Temasek#(Singapo

re)#

Garud

a#(Ind

onesia)#

Japan#Airlines#(Japan)#





taxes


TA X R A T E S & TA X R E V E N U E S

Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation ,

Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.





taxes


C O R P O R A T E & I N D I V I D U A L TA X A T I O N

Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation ,

Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.

!4%$

!3%$

!2%$

!1%$

0%$

1%$

2%$

3%$

4%$

Australia$ China$ India$ Indonesia$ Japan$ Korea$ Malaysia$ New$Zealand$ Thailand$

%$Change$in$$Revenue$from$Corporate$TaxaGon$$ %$Change$in$Revenue$from$Individual$Income$TaxaGon$

]

C O N C L U S I O N S

- A debate about the future of taxation must first clear

about what is the problem and what is causing it

- The geopolitics of international taxation has not changed

because of the internet

- Asia is a net gainer from the geopolitics of taxation (lower

taxes & export-led economies)

- Any solution should be agreed internationally rather than

being imposed unilaterally

- Taxes on the internet are a tax on economic growth

M A R T I N A F R A N C E S C A F E R R A C A N E E M A I L : M A R T I N A . F E R R A C A N E @ E C I P E . O R G

THANK YOU!

mailto:[email protected]?subject=

Ferracane, M. and H. Lee-Makiyama, H. (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation , Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.

Lee-Makiyama, H. and B. Verschelde (2014), OECD BEPS: Reconciling Global Trade, Taxation Principles and the Digital Economy. ECIPE Occasional paper 4-2014.

R E F E R E N C E S