Recent developments show that the current corporate tax rules no longer fit the modern context. The business environment has become more globalized and digital, while corporate income is taxed at the national level. This incentivizes multinational firms – especially large digital platforms such as Google and Facebook – to engage in international tax planning aimed at avoiding taxes. The EU in particular seems to be vulnerable to tax planning activities by these U.S. tech giants. The OECD/G20 BEPS project has declared the tax challenges of the digital economy as one of the top priorities. However, no result should be expected in the short term as the US takes a biased position toward their digital companies. Therefore, Europe has to take the lead with a modern framework for corporate taxation in the EU. In this note, we shed light on why such tax reform is needed, and how to make large digital platforms subject to tax. With this note, we wish to provoke a more concrete discussion on this important matter.
