Digitalization has profoundly transformed the global economy, introducing business models that operate without requiring a physical presence in the countries where they provide services.
This shift presents significant challenges for traditional tax systems, which rely on the physical location of economic activities to determine taxation.
Tax challenges in the digital economy
Digital companies can interact with consumers across multiple jurisdictions without establishing a physical presence in them.
This complicates the application of traditional tax rules, as it is not always clear where profits are generated and, therefore, where taxes should be paid.
Additionally, the increasing importance of intangible assets, such as data and algorithms, further complicates the valuation and allocation of profits across different countries.
International initiatives to address digital taxation
To tackle these challenges, the Organisation for Economic Co-operation and Development (OECD) has proposed a two-pillar approach:
- Seeks to reallocate part of the taxing rights over the largest and most profitable multinational corporations to the jurisdictions where their consumers are located, regardless of whether the company has a physical presence there
- Introduces a global minimum tax rate of 15% to ensure that multinational companies pay a minimum level of taxes, regardless of where they operate.
These two pillars aim to modernize the international tax system and ensure a fairer distribution of tax revenues in the digital era.
Spain’s response to digital taxation
Spain has taken proactive steps to adapt its tax system to the digital economy. In 2020, it enacted Law 4/2020, of October 15, which introduced the Digital Services Tax. This tax applies to:
- Online advertising services
- Intermediation on digital platforms
- The sale of user-generated data.
The objective of this tax is to levy activities where user participation significantly contributes to the value created by the company.
Impact on Tax Authorities
Digitalization affects not only businesses but also Tax Authorities, which must modernize to effectively manage taxation in the digital economy.
The implementation of advanced technologies enables more efficient data collection and analysis, improving the detection of tax evasion and facilitating taxpayer compliance with tax obligations.
In conclusion, it is essential for both companies and Tax Administrations to continue adapting to this constantly evolving environment to ensure the fairness and efficiency of the global tax system.