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Addressing the Tax Challenges of the Digital Economy

image of Addressing the Tax Challenges of the Digital Economy

The spread of the digital economy poses challenges for international taxation. This report sets out an analysis of these tax challenges. It notes that because the digital economy is increasingly becoming the economy itself, it would not be feasible to ring-fence the digital economy from the rest of the economy for tax purposes. The report notes, however, that certain business models and key features of the digital economy may exacerbate BEPS risks. These BEPS risks will be addressed by the work on the other Actions in the BEPS Action Plan, which will take the relevant features of the digital economy into account. The report also analyses a number of broader tax challenges raised by the digital economy, and discusses potential options to address them, noting the need for further work during 2015 to evaluate these broader challenges and potential options.

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Typical tax planning structures in integrated business models

The simplified examples below are based on what a number of tax administrations have observed. They are intended to provide an illustration of ways in which the implementation of business models through legal and tax structures may place pressure on the existing international tax framework. They are not exhaustive, and do not pretend to reflect the full scope of structures that may be used to achieve base erosion and profit shifting (BEPS).

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