Presentation at Thammasat University in Bangkok and at the Korea Chamber of Commerce in Seoul - August/September 2017

1. T H E G E O P O L I T I C S O F
O N L I N E TA X A T I O N
M A R T I N A F R A N C E S C A F E R R A C A N E
R E S E A R C H A S S O C I A T E A T E C I P E

2. • Neutrality: tax rules should not privilege any form of
commerce over another
• Efficiency: tax rules should minimise administrative
and law-compliance costs
• Effectiveness: tax rules should prevent double
taxation and tax evasion by individuals and firms
P R I N C I P L E S I N I N T E R N A T I O N A L TA X A T I O N

4. D I G I TA L TA X A T I O N
• Neutrality: discrimination against digital companies
• Efficiency: additional administrative burden and
uncertainty
• Effectiveness: exacerbated risks of double taxation

6. I S T H E R E A P R O B L E M
W I T H O N L I N E TA X A T I O N ?

7. - Digital MNC do not pay taxes
- Digital trade leads to base erosion
- Governments have to increase personal taxes in
order to compensate for the loss in corporate
taxes
C L A I M S A B O U T D I G I TA L TA X A T I O N

8. - Digital MNC do not pay taxes
- Digital trade leads to base erosion
- Governments have to increase personal taxes in
order to compensate for the loss in corporate
taxes
C L A I M S A B O U T D I G I TA L TA X A T I O N

9. A V E R A G E E F F E C T I V E TA X R A T E S ( E T R S ) O F L E A D I N G O N L I N E S E R V I C E S
P R O V I D E R S C O M PA R E D T O O T H E R L E A D I N G A S I A - PA C I F I C M N C S ,
F I V E - Y E A R A V E R A G E ( 2 0 1 2 - 2 0 1 6 )
Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation ,
Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.
0%#
10%#
20%#
30%#
40%#
50%#
60%#
LG#Electronics#(Korea)#
Airtel#(India)#
Rakuten#(Japan)#
NTT#(Japan)#
Tata#CommunicaFons#(India)#
BHP#Billiton#(Australia)#
Honda#(Japan)#
Toyota#(Japan)#
KT#CorporaFon#(Korea)#
Naver#(Korea)#
Samart#Group#(Thailand)#
Telstra#(Australia)#
Globe#(Philippines)#
Korea#Electric#Power#CorporaFon#(Korea)#
Qantas#(Australia)#
VieRel#Mobile#(Vietnam)#
Spark#(New#Zealand)#
Hitachi#(Japan)#
SoUbank#Group#(Japan)#
HM#Sampoerna#(Indonesia)#
OECD#Average#Statutory#Tax#Rate#
Telkom#Indonesia#(Indonesia)#
China#Unicom#(China)#
Tata#Motors#(India)#
China#Mobile#(China)#
China#Telecom#(China)#
Digi#TelecommunicaFons#(Malaysia)#
Industrial#and#Commercial#Bank#of#China#(ICBC)#
China#ConstrucFon#Bank#(China)#
Average#EffecFve#Tax#Rate#of#main#US#Digital#
Samsung#(Korea)#
Asia#Average#Statutory#Tax#Rate#
Bank#Rakyat#(Indonesia)#
SK#Telecom#(Korea)#
Wilmar#InternaFonal#(Singapore)#
Advance#Info#Service#(AIS)#(Thailand)#
Tencent#(China)#
PLDT#Inc.#(Philippines)#
Indosat#(Indonesia)#
Vinamilk#(Vietnam)#
United#Overseas#Bank#(Singapore)#
FPT#Group#(Vietnam)#
Singtel#(Singapore)#
Alibaba#(China)#
Telekom#Malaysia#
Temasek#(Singapore)#
Garuda#(Indonesia)#
Japan#Airlines#(Japan)#

10. - Digital MNC do not pay taxes
- Digital trade leads to base erosion
- Governments have to increase personal taxes in
order to compensate for the loss in corporate
taxes
C L A I M S A B O U T D I G I TA L TA X A T I O N

11. TA X R A T E S & TA X R E V E N U E S
Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation ,
Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.

12. - Digital MNC do not pay taxes
- Digital trade leads to base erosion
- Governments have to increase personal taxes in
order to compensate for the loss in corporate
taxes
C L A I M S A B O U T D I G I TA L TA X A T I O N

13. C O R P O R A T E & I N D I V I D U A L TA X A T I O N
Source: Ferracane, M. and H. Lee-Makiyama (2017), The Geopolitics of Online Taxation in Asia-Pacific: Digitalisation ,
Corporate Tax Base and the Role of Governments. ECIPE Policy Brief 2-2017.
!4%$
!3%$
!2%$
!1%$
0%$
1%$
2%$
3%$
4%$
Australia$ China$ India$ Indonesia$ Japan$ Korea$ Malaysia$ New$Zealand$ Thailand$
%$Change$in$$Revenue$from$Corporate$TaxaGon$$ %$Change$in$Revenue$from$Individual$Income$TaxaGon$

14. ]
C O N C L U S I O N S
- A debate about the future of taxation must first clear
about what is the problem and what is causing it
- The geopolitics of international taxation has not changed
because of the internet
- Asia is a net gainer from the geopolitics of taxation (lower
taxes & export-led economies)
- Any solution should be agreed internationally rather than
being imposed unilaterally
- Taxes on the internet are a tax on economic growth

15. M A R T I N A F R A N C E S C A F E R R A C A N E
E M A I L : M A R T I N A . F E R R A C A N E @ E C I P E . O R G
THANK YOU!

16. Ferracane, M. and H. Lee-Makiyama, H. (2017), The Geopolitics
of Online Taxation in Asia-Pacific: Digitalisation , Corporate Tax
Base and the Role of Governments. ECIPE Policy Brief 2-2017.
Lee-Makiyama, H. and B. Verschelde (2014), OECD BEPS:
Reconciling Global Trade, Taxation Principles and the Digital
Economy. ECIPE Occasional paper 4-2014.
R E F E R E N C E S