EU members preparing to directly tax the digital economy: free-riders’ time?

As ‘the digital economy is increasingly becoming the economy itself’,[1] there is growing opinion that big companies should pay their “fair share” of taxes. It is not surprising, then, that governments are setting their sights on taxing the digital economy. Under the traditional rules for taxing cross-border business profit generation, profits can be taxed in a country other than the company’s country of residence only if they are attributed to a permanent establishment (PE) located there. The PE concept was designed with the idea of ‘physical presence’ in another country, i.e., traditional brick-and mortar businesses,...