Profit allocation in digital businesses

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The item Profit allocation in digital businesses represents a specific, individual, material embodiment of a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation.
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Summary: The ongoing digitalisation of the economy poses a challenge to the existing system of corporate profit taxation. A conceptual analysis of digital business models can help to assess the functions and risks of involved parties and can provide benchmarks to set transfer prices. Reform proposals, e.g., the profit split method, and adjustments to the transfer pricing guidelines should minimise uncertainty for taxpayers and facilitate the administration of cross-border transactions. The OECD minimum tax and the deduction disallowance proposal could have far-reaching and potentially overshooting impacts on the international corporate tax system if not harmonised globally; they go beyond the most pressing tax issues in the era of digitalisation

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Summary: The ongoing digitalisation of the economy poses a challenge to the existing system of corporate profit taxation. A conceptual analysis of digital business models can help to assess the functions and risks of involved parties and can provide benchmarks to set transfer prices. Reform proposals, e.g., the profit split method, and adjustments to the transfer pricing guidelines should minimise uncertainty for taxpayers and facilitate the administration of cross-border transactions. The OECD minimum tax and the deduction disallowance proposal could have far-reaching and potentially overshooting impacts on the international corporate tax system if not harmonised globally; they go beyond the most pressing tax issues in the era of digitalisation