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International Practice Responding to Digital Tax and Its Impacts on China (No.277, 2021)


By Feng Qiaobin & Li Chengjian, Research Department of Macro Economy, DRC

Research Report, No.277, 2021 (Total 6342) 2021-9-18

Abstract: The digital economy is changing the world in many ways. Looking around the world, major economies and some international organizations are taking action to actively respond to the challenges induced by digital economy on taxation. Major economies around the world have introduced various digital products and services into their sales tax systems. However, there are still no unified international rules for cross-border digital services. At present, there are mainly the Two-Pillar Solution and the Bilateral Coordination Plan initiated respectively by OECD and the United Nations, while some countries have introduced unilateral taxes on digital services. The international digital taxation reform will exert a significant impact on China. The direct impact may not look that serious at the moment, but the indirect impact is far-reaching. It is necessary for us to strengthen researches on the tax system of digital economy. In the short term, we need to highlight adaptation to and improve the inclusiveness of the current tax system to the digital economy. In the medium term, we need to emphasize reform to adjust the regional tax sharing system to promote balanced regional development. In the long run, we need to focus on reshaping and establishing a new framework for a sound taxation system in addressing digital economy.

Keywords: digital economy, Two-Pillar Solution, digital services tax, major impacts