The Trajectory of a New World Tax Order in the Digital Economy Era

Abstract

The disruptive development of digital technology (disruptive technology) has driven the world to enter a full-fledged digital economy era with digital technology at its core. The ubiquity of the digital economy will inevitably consequentially affect the economy and society in a myriad of dimensions, including within the domain of taxation. This raises the issue that the current principles of taxation in various countries, especially the collection of taxes from multinational enterprises, are outdated and unable to adequately cope with the disruptive environment within the digital economy era. Thus, over the past decade, there has been a wave of taxation reforms around the world so that tax collection in the digital economy is more aligned and appropriate. This research therefore aims to study the trend of tax reforms as a result of tax harmonisation. Looking at the changes in taxation at the national, regional, and global levels, it is found that the reform and integration trend has shifted towards a new world tax order which aims to establish global tax norms to support appropriate tax collection in the digital economy era. This research analysed the direction of such changes and contends that although the trend of tax reform and integration is moving towards a new world tax order, it has not yet developed to the unification level where there is a unified set of principles. It remains at the level of intergovernmental cooperation, in both bilateral and multilateral approach, emphasising on the use of both hard and soft laws.  However, comparing to the old approach, the new world tax order focuses heavily more on employing multilateral instruments. In addition, this research presents how the shift toward a new world tax order as a result of such tax reform and integration trends has had significant implications for tax jurisdiction as well as national tax sovereignty. This creates both strengths and weaknesses that lead to problems, obstacles and opportunities that differ from country to country.