Power Point Presentation by Dominika Langenmayr, professor of Economics at Catholic University Eichstätt-Ingolstadt, as part of the OECD Berlin Centre's webinar on 2 June 2020 on the challenges of the digitalisation of the economy.

1. Addressing the Tax Challenges of the Digitalisation of
the Economy
OECD Berlin Centre and DIW Webinar
Discussion by
Dominika Langenmayr
KU Eichstätt-Ingolstadt, CESifo &
KU Research Institute for Taxation
Prof. Dr. Dominika Langenmayr 1@D_Langenmayr

2. How did we get here?
 First proposals of a destination-based corporate tax around
2000
- Combined with cash flow as tax base
- Destination basis (taxation at the location of the consumer)
because this location cannot be influenced by the firm
 no profit shifting
 Picked up by policymakers in the United States in 2016, but not
part of US tax reform
 Now: Pillar 1 introduces destination basis for e.g. 20% of residual
profit
Prof. Dr. Dominika Langenmayr 2

3. Who gains, who loses?
 Everybody gains?
Prof. Dr. Dominika Langenmayr 3
 Taxation at location of
consumer is beneficial for
countries with current
account deficit (who import
more than they export)
 Countries with high exports
more likely to lose
 Would be interesting to see
revenue effects split according
to current account position

4. Where is the additional tax revenue coming
from?
 Tax havens? But firms aren’t paying (much) tax there…
 Obviously, for positive revenue effects, firms will have to pay more
tax.
Prof. Dr. Dominika Langenmayr 4
 What does “a firm” paying tax actually mean?
 In the end, some humans have to bear the burden of taxation.
 Firm owners?
 Workers? Consumers? Others who sell stuff on Amazon?

5. What do we know about tax incidence?
 Workers bear about 50% of
the tax burden of local
business taxes in Germany
(Fuest, Peichl, Siegloch, AER
2018)
 In the U.S., firm owners bear
roughly 40% of the incidence,
workers 30-35% and
landowners 25-30% (Suárez
Serrato and Zidar, AER 2016)
 No free lunch for Europe by
taxing US multinationals more
Prof. Dr. Dominika Langenmayr 5
Source: Fuest, Peichl, Siegloch (2018)

6. Pillar 2: Minimum Tax
 Directly increases revenue because of additional tax on profits taxed
in low-tax jurisdictions
 Second aim: Induce low-tax jurisdictions to increase their tax rates
 Limits international tax competition
Prof. Dr. Dominika Langenmayr 6
 What could go wrong?
 What are the incentives for countries that currently have a tax rate
above the threshold?
- If they lower tax rate to the minimum rate, they cannot be undercut
anymore
- Potentially stronger incentives for these countries to lower their tax
rates if there is a minimum tax (Konrad, 2009)

7. Final thoughts
 After decades of discussion, we’re seeing some fundamental
changes in corporate taxation!
 Pillar 1 introduces residual profit allocation to market country
 Advantages for economic efficiency and robustness to avoidance
 Pillar 2 introduces minimum tax
 Effective limit to tax competition from tax havens
 Very important and interesting work estimating revenue and
investment effects
Prof. Dr. Dominika Langenmayr 7