Although there is no international consensus on the issue but it is the right time for a global tax net for the internet. Comment.
India has supported the idea of the digital service tax at the G20 Summit which was held at Japan last week. The digital service tax is collected from global online businesses which will be shared by different countries in the same ratio. Although there are no concrete details of the proposal so far but if it comes into practice it will mean internet bigwigs will have to pay India some taxes despite the fact that they are not based in India and are not even making any earnings on Indian soils. Many nations like US, UK, Japan and France are in favour of such a global deal as this will give the world a fair share of the taxes as much of the internet traffic on which these internet giants thrive are based in these countries.
However, tracking the global digital economy is not an easy task especially from the taxation perspective. Almost all businesses have clear rules for local taxation i.e. within the country. However, these online businesses operate on very intricate business models as most of them drive their revenues not directly from the users but the advertising which transcends many borders and thus is difficult to tax. Even other aspects which add value to these businesses are difficult to track. The idea which was first floated by the EU to basically have a common taxation system for online services has not been able to reach any firm ground. This has been primarily because of a general lack of consensus on various proposals.