The Reflection of Data-Driven Value Creation in the 2018 OECD and EU Proposals

Is the current corporate tax system fit for the digitalized economy? The 2018 interim report of the OECD and the proposals of the European Commission on the introduction of significant digital presence and a digital services tax give new insights into policymakers’ perception of ‘value creation’ and income generation in digitalized business models.
Although the right way to tax digitalized business models seems disputed with regard to the diverging outcomes of the OECD’s and European Commission’s work so far, it seems to be of common understanding that user data are susceptible of establishing a taxable nexus. In a first step, this article aims at analysing how the collection and processing of user data may create such genuine link between an income generating activity and a state territory enabling this state to exercise its taxing right. In that respect, the concept of value creation, a driving concept in the discussion on how to tax digitalized businesses, is critically reviewed and an attempt to understand its real meaning is presented. In a second step, the article analyses to which extent the long- and short-term proposals of the European Commission reflect such data-driven (taxable) value creation, critically highlighting their main characteristics and flaws.