By Feng Qiaobin, Zhang Qi & Li Chengjian, Research Team on “A Prospective Study of Digital Tax”, Department of Macroeconomic Research, DRC

Research Report, No.166, 2020 (Total 5910) 2020-7-2

Abstract: As digital economy is changing the world, OECD has initiated and is taking a leading position in the global taxation reform tailored to digital economy. OECD’s reform plan includes two independent pillars. Pillar one plays the principal role and its revolutionary significance is that for the first time in history the countries where the markets locate and customers’ countries could enjoy the legitimate rights of sharing the income tax of multinational enterprises. Pillar two aims to crack down on tax base erosion and profit shifting, covering economic digitalization and related activities beyond. The economic digital taxation reform arrangements plan to adjust the international rules pertinent to relevant countries’ interests. Consequently, the European countries and the U.S. take quite different and even opposite stances in this regard, while the member countries within the EU also hold dissenting views. It is expected that the reform plan will have to face hard consultations and debates before a final decision is made. As the world’s second largest digital economy and a third party, China’s principled stand in the discussion of OECD’s digital tax will play a balancing role to the current landscape. China needs to check and balance the game with dexterity in line with China’s strategy of opening to the outside world.

Keywords: digital tax, global trends, OECD’s reform plan