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How unilateral digital services taxes put global tax reforms in motion

This episode of Tax and Law in Focus explores how the proliferation of DSTs has helped fast-track BEPS 2.0, triggering the biggest shake-up in international taxation for decades.

Related topics Tax Global trade

Podcast host Susannah Streeter welcomes Barbara Angus, EY Global Tax Policy Leader; Channing Flynn, EY Global International Tax and Transaction Services Leader, EY Global Technology Tax Sector Leader and Matthias Luther, EY Global Leader of the Digital Services Tax Activation Team

Together they discuss the significant growth of digital services taxes (DSTs), the additional complexity and risk they pose for multinationals, the perception that many DSTs were designed to unfairly target US ‘big tech,’ the role they have played generating consensus around BEPS 2.0 and DST’s future in a new minimum-tax world.

The introduction of sector-specific taxes is nothing new, but DSTs are far more than a targeted airline or construction tax. They are widely regarded as a tool used to break the impasse around the best way to tax the digital economy. 

The podcast panelists discuss the view that DSTs were the metaphorical ‘stick’ used (predominantly by the EU and UK) to encourage the US to engage with minimum tax and tax reallocation rules within the OECD’s BEPS 2.0 proposals.

Despite agreement on minimum tax, however, it is unlikely that BEPS 2.0 will signal the end of unilateral attempts to tax or impose levies on the digital economy. Governments are actively seeking new revenue streams to fill the tax gap, and companies doing business on the internet will remain a prime target.

It is equally unlikely that jurisdictions will swiftly reach a consensus over tax-reallocation rules to replace the time-honored principle of physical nexus. In short, with the digital economy continuing to evolve, there is still considerable uncertainty and risk to be managed this area.

Key takeaways: 
  • Unilateral DSTs are credited with galvanizing support for global minimum taxation and a re-evaluation of time-honored nexus rules, in respect of the digital economy.
  • There is already considerable political momentum behind the minimum taxation rules outlined in BEPS 2.0 Pillar Two, with legislative activity in both the US and EU.
  • There continues to be significant unanswered questions about how BEPS 2.0 Pillar One tax allocation rights will work. It is unclear to what extent jurisdictions will relinquish tax revenue and whether they will be willing to do so.

For your convenience, full text transcript of this podcast is also available. Read the transcript.


Photographic portrait of Susannah Streeter
Susannah Streeter
International broadcaster and financial analyst


Episode 6

Duration 33m 15s