The challenges of digital taxation

Guillermo Sánchez-Archidona, Professor of Financial and Tax Law at the Universidad Complutense de Madrid, explains in this article the variety of challenges faced by current taxation systems seeking to tackle the new digital economy.

The traditional tax framework needs to be adapted to the new reality, in a world where digital transactions, consumption of intangible products and economic exploitation of data are on the rise. 

Some ideas highlighted in the article: 

• The 21st century user and economic exploitation of data: The digital consumer, in addition to consuming the digital services, generates a series of data that are exploited and that are translated into profits for the companies dedicated to these activities. 
• The development of artificial intelligence or big data among other technologies would lead these new lines of business to levels unforeseen in the last century, posing challenges to tax authorities such as what is the value of the data and where is the economic value created.
• The need to adapt the regulatory framework: As the author points out, "the big problem in digital taxation is the existence of a tax framework based on the reality of the last century that was not designed to tax the new economic realities of the 21st century." The new regulatory proposals, such as the "the Spanish digital services tax," would not solve the legal challenges posed by the digital economy, but would help to increase public tax revenues that have been affected by the generation of this digital wealth that is not taxed, especially in corporate tax.