The Taxation of the Digital Economy: the OECD BEPS Policy Response Versus the UN Facti Panel's Principle Response

Abstract

The residence/source tax rules that have been in place for over a decade have become redundant in the modern-day digitalised economy. Concepts that created tax certainty such as the concept of permanent establishment have become redundant as the value chains and business models have changed. Although a work in progress, the OECD has been working towards developing a new tax nexus and allocation of taxing rights under BEPS 2.0. The UN FACTI Panel has meanwhile adopted a principle-based approach that attempts to guide countries towards a fairer more transparent way of taxing the digital economy. The question this paper seeks to answer is whether implementing the UN FACTI Panel's principle-based approach as part of the formulation of taxing and profit allocation rules under the OECD BEPS' policy driven approach give these rules the legitimacy needed for equitable and fair enforcement? It concludes by adopting the position that the OECD rules at present leave little for developing counties and that an African position that better safeguards her interests should be adopted.