Digital Law Journal

Advanced search

Digital challenges and tax equity


Historically, tax reforms have always been a response to societal transformations, which aim to modernize relations between states, businesses and citizens. The contemporary digital transformations of social relations intensified by globalization have become another challenge. The tax system has been at the centre of ongoing changes. Consequently, there arises a need for reforms of tax systems. Likewise, it is necessary to reassess and review the principles ensuring the efficiency of such systems.

The research aim is to investigate the impact of the digital society and economy on tax equity. This purpose also includes a critical analysis and a summary of the ways in which tax systems in different countries and corporations respond to digital challenges. The challenges in question are associated with tax burden on the activity of the abovementioned entities when they implement business models in virtual reality.

The research methodology is based on the fundamental principles of the Russian tax law with particular regard to the mandatory elements of taxation. Additionally, the research method involves the classical principles of taxation such as equity, certainty, convenience and economy. The authors have also developed an original approach to consider the formation of excess profits by digital companies and digital rentiers.

The analysis of the terms ‘digital presence’, ‘market jurisdiction’ was conducted with due consideration of jurisdiction in digital markets directly related to the activity of digital platforms. The paper also examined the potential opportunities and dangers that arise in the process of automated payment of taxes in each deal. Furthermore, specific problems regarding the determination of border crossing by an intangible asset or a provided service which can consist of both a tangible asset and a digital service were addressed. The research on the impact of digital solutions in business was performed in conjunction with the analysis of the European approach to similar issues. In accordance with the European framework, attribution of profits to the jurisdictions of those countries where consumers reside establishes the principles of equity. Based on this evidence, therefore, it was demonstrated that it is becoming a fundamental necessity in modern society to increase tax certainty of virtual businesses despite the opportunist attitude of some companies (with respect to national governments) as well as governments (with respect to the global economy). As taxpayers’ physical presence in a particular jurisdiction to generate profits which form the tax base is no longer required, a balance between national tax systems and the appearance of supranational taxation should be found. This objective poses a risk of failing to provide conditions necessary to ensure tax equity.

The thesis that tax competition exists in countries and various territories was supported, which enabled the authors to demonstrate potential of concerted effort to develop supranational taxation aimed at tax equity restoring. Furthermore, such mandatory elements of taxation as ‘object of taxation’, ‘tax base’, ‘tax rate’ are still valid in the digital world. At the same time the evolution of business models used by digital and supranational companies, servicization of the economy, digital service development and smart products creation require revising the definitions of these terms.

About the Authors

Igor M. Stepnoff
Financial University under the Government of the Russian Federation
Russian Federation

Dr. Sci. (Economics), Prof.

Author contributions: Igor M. Stepnoff did scientific editing; formulated the general research task; identified and investigated the impact of digital issues on tax equity with regard to the creation and development of tax competition among countries; analysed the features of automated payment of taxes as part of each payment; researched the issues of title transfer and border crossing by an intangible asset or a provided service; addressed the problem of choosing the type of taxable income; considered the choice between profit and taxpayers’ solvency.

Julia A. Kovalchuk
Moscow Aviation Institute (National Research University)
Russian Federation

Dr. Sci. (Economics), Prof.

Author contributions: Julia A. Kovalchuk did scientific editing; developed the research methodology; identified and investigated the impact of digital problems on tax equity with regard to supranational and national tax burden on digital income; assessed the phenomena of digital presence and interaction with customers; collected and analysed data on taxes on international trade and taxation of digital businesses.


1. D’onfro D., Rosenbaum L. (2019). How Google secretly collects patients’ medical data using the new service. The Forbes, 17.11.2019. URL: (Accessed: 19.02.2020) (In Russ.).

2. Kirova E.A., Morozova N.G., Bezverkhiy A.S. 2019. Transformation of the Russian tax system in the context of establishment of the digital economy. Vestnik universiteta, 7, 118–124. doi:10.26425/1816-4277-2019-7-118- 124 (In Russ.).

3. UN. UNCTAD. (2019). Report on the digital economy, 2019. Value creation and benefits: implications for developing countries. URL: (Accessed: 21.02.2020) (In Russ.).

4. Stepnov I.M., Kovalchuk J.A. (2018). Platform capitalism as the source of digital rentier’s superprofit. MGIMO Review of International Relations, no. 4(61), 107–124. doi:10.24833/2071-8160-2018-4-61-107-124 (In Russ.).

5. Timchenko E.N. (2019). Tax regulation of e-Commerce: global trends and prospects for improving the system of benefits in Russia. Bulletin of Tomsk state University. Economics, no. 46, 265-278. doi:10.17223/19988648/46/18

6. Tikhonova A.V. (2018). Google tax: how not to take a step back in the near future? International accounting, vol. 21, no. 10, 1129–1139. doi:10.24891/ia.21.10.1129

7. Agrawal D.R., Mardancde M. (2019). Will destination-based taxes be fully exploited when available? An application to the U.S. commodity tax system. Journal of Public Economics, vol. 169, 128–143. doi:10.1016/j.jpubeco.2018.11.003

8. Cheng W., Brandi C. (2019). Governing digital trade – a new role for the WTO. Briefing Paper, No. 6/2019, Deutsches Institut für Entwicklungspolitik (DIE), Bonn. doi:10.23661/bp6.2019

9. Dijck J. (2019). Governing digital societies: Private platforms, public values. Computer Law & Security Review: The International Journal of Technology Law and Practice. doi:10.1016/j.clsr.2019.105377

10. Gnangnon S.K. (2020). Internet and tax reform in developing countries. Information Economics and Policy, In Press, available online 30.01.2020. doi:10.1016/j.infoecopol.2020.100850

11. Feng C.-M., Wu P.-J. (2009). A tax savings model for the emerging global manufacturing network. International Journal of Production Economics, no. 122(2), 5340–546. doi:10.1016/j.ijpe.2009.05.019

12. James D. (2019). Anti-development Impacts of Tax-Related Provisions in Proposed Rules on Digital Trade in the WTO. Development, no. 62, 58–65. doi:10.1057/s41301-019-00205-4

13. Henley J. (2019). Ten cities ask EU for help to fight Airbnb expansion. The Guardian, 20.07.2019. URL: (Accessed: 20.02.2020).

14. Kupelian B. Global EconomyWatch. Predictions for 2020: «Slowbalisation» is the new globalisation. PwC, 2020. URL: (Accessed: 23.02.2020).

15. NetzDG. (2017). Act to Improve Enforcement of the Law in Social Networks (Network Enforcement Act). Bearbeitungsstand: 12.07.2017. Germany, Federal Ministry of Justice and Consumer Protection. URL: (Accessed: 23.02.2020).

16. Neumanna R., Holmana J., Almb J. (2009). Globalization and tax policy. North American Journal of Economics and Finance, no.20, 193–211. doi:10.1016/j.najef.2009.02.001.

17. OECD. (2020). Statement by the OECD/G20 Inclusive Framework on BEPS on the Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalisation of the Economy – January 2020, OECD/G20 Inclusive Framework on BEPS, OECD, Paris. URL: (Accessed: 19.02.2020).

18. OECD. (2015). OECD delivers international standard for collection of VAT on crossborder sales. URL: (Accessed: 22.02.2020).

19. PwC. (2020). Global Economy Watch. URL: (Accessed: 23.02.2020).

20. Scarcella L. 2019. E-commerce and effective VAT/GST enforcement: Can online platforms play a valuable role? Computer Law & Security Review: The International Journal of Technology Law and Practice. doi:10.1016/j.clsr. 2019.105371

21. The Council of the European Union. (2012). Council Regulation (EU) No. 967/2012 of 9 October 2012. Official Journal of the European Union, 20 October 2012, L 290/1. (Accessed: 23.02.2020).

22. Turina A. (2019). The progressive policy shift in the debate on the international tax challenges of the digital economy: A “Pretext”for overhaul of the international tax regime? Computer Law & Security Review: The International Journal of Technology Law and Practice. doi:10.1016/j.clsr.2019.105382.

For citation:

Stepnoff I.M., Kovalchuk J.A. Digital challenges and tax equity. Digital Law Journal. 2020;1(1):39-58. (In Russ.)

Views: 225

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.

ISSN 2686-9136 (Online)