Thema 2022

Taxing the digital economy: does it matter to you?

Hinweis: Dieses Thema kann nur auf Englisch bearbeitet werden

The challenge with the taxation of the digital economy is twofold. On the one hand, one often hears that firms do not pay their fair share of taxes in the country where the value is created. For instance, we know that social media monetizes targeted advertising. If the company develops the algorithm for such advertising, let’s say, in the US, the revenue from targeted advertising will be taxed there. However, when such a company operates in Europe, value is created in European countries because targeted advertising requires massive data.

On the other hand, digitalization increases the sharing economy, where numerous individuals operate and earn money on platforms such as Airbnb, Instagram and TikTok. Hosts on the former website earn money by renting out a room or a flat, influencers on the latter platforms often receive gifts and/or income from sponsors. However, many countries struggle with the taxation of income from the sharing economy, as many people refrain from self-reporting these types of income. As such ways of earning moneys become more and more relevant and familiar in the digital economy, addressing such a challenge can be a pressing one.

There are several ways to address the latter challenge. In order to think of a possible solution you could start to think of the following questions:
– As a costumer of Airbnb or as a follower on Instagram or TikTok, does it matter to you whether people pay their fair share of taxes?
– Which drivers are important for the tax reporting behavior of individuals?
– How could you address the problem?
– Can you think of ways to incentivize individuals to self-report their income earned in the sharing economy?