The future of indirect taxation in a digital world – Transactions in the digital economy are becoming subject to greater levels of indirect taxation than the traditional economy

Transactions in the digital economy are becoming subject to greater levels of indirect taxation than the traditional economy, meaning that the principle of neutrality is increasingly being disregarded in the pursuit of extra revenues.

As policymakers are increasingly taxing everything and everyone (see Proposition 1), the tax treatment between the ‘traditional economy’ and ‘digital economy’ is not always aligned; certain trends and actions have, in fact, led to a skewing toward taxing something sold in the digital space even though a special treatment is applied to similar products and services in the traditional economy. This could be because policymakers consider the two types of supplies not to be equivalent, or it could be the result of policymakers struggling to adapt their rules to create parity between digital economy business models that are competing with the traditional economy.

Source KPMG

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