Digitalization And Tax Law 2023

S. 493Digital taxation reshaping cross-border dispute resolution

Teresa Teixeira Mota

1. Introduction

The growing digital transformation that has been carried out globally has undeniable repercussions on the economy, changing business models, leveraged on the commonly called digital economy, as well as the way of providing services.

This profound change generates an imbalance between States and between companies (in the dichotomy between ‘traditional businesses’ and ‘digital businesses’).

As far as States are concerned, the lack of physical presence to provide services or sell goods globally from which many MNEs take advantage means that market jurisdictions (where these MNEs earn income without any physical presence) are deprived of any right to tax. This stems from the rules of International Tax Law as we know it, which have remained fairly unchanged over the years.

Aware of the profound change brought about by the emergence of the digital economy and the need to balance the allocation of taxing rights between residence and source jurisdictions, on the one hand, and market jurisdictions, on the other, by ensuring that tax revenues from the profits of MNEs are equitably distributed to the jur...