¹ A broad definition of the digital economy is adopted by the G20 to reflect the fact that not only information and communication technology sectors but also traditional sectors have become integrated with the digital economic ecosystem. See The G20, G20 Digital Economy Development and Cooperation Initiative (5 September 2016) <http://www.g20.utoronto.ca/2016/160905-digital.html>.

² See the Organisation for Economic Co-operation and Development (OECD), Consumption Tax Trends 2020: VAT/GST and Excise Rates, Trends and Policy Issues (OECD Publishing 2020) 12. Although the specific term used in jurisdictions can differ, the essence and nature of a VAT and a goods and services tax (GST) are identical. See also EY, Worldwide VAT, GST and Sales Tax Guide 2021 (EY 2021) 259–60, 1623. For simplicity and convenience reasons, the article uses VAT to refer to VAT, GST, and similar taxes. Where the title of legislation, official documents and publications uses VAT or VAT/GST, the article uses that term rather than VAT.

³ VAT has contributed about 20 per cent of total tax revenue on average in OECD countries. See OECD (n 2) 16; OECD, Revenue Statistics 2020 (OECD Publishing 2020) 17. This is even higher in Africa, Latin America and Caribbean, and Asia and the Pacific. See OECD, ‘Global Revenue Statistics Database’, <https://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm>. The IMF notes an accelerated digital transformation of the economy post-pandemic as part of which VAT will be a vital and reliable revenue contributor to the post-pandemic recovery in many jurisdictions. International Monetary Fund (IMF), World Economic Outlook, October 2020: A Long and Difficult Ascent (IMF 2020) 25.

⁴ OECD, Addressing the Tax Challenges of the Digital Economy, Action 1 – 2015 Final Report (OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing 2015) (OECD BEPS Action 1) 54–63.

⁵ World Trade Organization (WTO), World Trade Report 2019: The Future of Services Trade (WTO 2019) 6.

⁶ IMF (n 3) 49–50.

⁷ OECD BEPS Action 1 (n 4) 120–2.

⁸ See OECD, International VAT/GST Guidelines (OECD Publishing 2017) (OECD Guidelines) 15.

⁹ The concerns are examined in OECD BEPS Action 1 (n 4) 82–4.

¹⁰ M Olbert and C Spengel, ‘Taxation in the Digital Economy – Recent Policy Developments and the Question of Value Creation’ (2019) ZEW Discussion Paper No 19-010, 3. Imposing VAT based on where the supplier is located is called origin taxation. A few jurisdictions apply the origin principle to certain transactions, eg Brazil where exports are not zero rated in practice due to administrative barriers and limiting legal instruments. Cited in S Araújo and D Flaig, ‘Trade Restrictions in Brazil: Who Pays the Price?’ (2017) 32 Journal of Economic Integration 283, 288. See also OECD BEPS Action 1 (n 4) 83.

¹¹ M Olbert and A-C Werner, ‘Consumption Taxes and Corporate Tax Planning – Evidence from European Services Firms’ (2019) University of Mannheim Business School Working Paper.

¹² Those businesses are commonly called ‘exempt businesses’. See James, K, The Rise of the Value-Added Tax (CUP 2015) 58CrossRefGoogle Scholar.

¹³ D Mattioli, ‘Big Tech Companies Reap Gains as Covid-19 Fuels Shift in Demand’ (The Wall Street Journal, 29 October 2020) <https://www.wsj.com/articles/amazon-sales-surge-amid-pandemic-driven-online-shopping-11604003107>; ‘Tech Giants’ Profits Soar as Pandemic Boom Continues’ (BBC, 27 July 2021) <https://www.bbc.com/news/business-57979268>; ‘Google Search, YouTube Sales Soar to Record High in Covid-19 Pandemic’ (Business Standard, 28 July 2021) <https://www.business-standard.com/article/international/google-search-youtube-sales-soar-to-record-high-in-covid-19-pandemic-121072800307_1.html>.

¹⁴ For example, the estimated EU VAT revenue loss was around EUR 170 billion (2013) and EUR 150 billion (2016). European Commission, ‘VAT Action Plan: Commission Presents Measures to Modernise VAT in the EU’ (1 April 2016) <http://europa.eu/rapid/press-release_IP-16-1022_en.htm>; European Commission, ‘VAT: EU Member States still Losing Almost €150 billion in Revenues according to New Figures’ (21 September 2018) <https://europa.eu/rapid/press-release_IP-18-5787_en.htm>. In New Zealand, the lost GST revenue from cross-border services and intangibles and goods was estimated to be about NZD 40 million per year. New Zealand Inland Revenue, GST: Cross-border Services, Intangibles and Goods (Inland Revenue 2015) 5.

¹⁵ VAT double taxation occurs ‘where two states levy VAT on the same supply’. Situations that can give rise to this are when national rules determining the place of taxation differ, when the rules, albeit similar, are subject to either different legal interpretation or there is a different interpretation of the underlying facts, or when a supply is characterised differently. T Ecker, A VAT/GST Model Convention (IBFD Publications 2013) 35, 37–45. VAT non-taxation occurs ‘when no country has imposed the tax on the relevant subject matter’, which means no tax burden will be passed onto consumers. R Millar, ‘Intentional and Unintentional Double Non-taxation Issues in VAT’ (2009) Sydney Law School Legal Studies Research Paper No 09/45, 8. The non-taxation concerns the practical difficulty of collecting the tax, particularly if the customer is a final consumer unregistered for VAT purposes.

¹⁶ The most important OECD guidelines are the OECD Guidelines (n 8). The OECD Committee on Fiscal Affairs developed the International VAT/GST Guidelines in 2006, with the latest version issued in 2017.

¹⁷ See eg Millar (n 15); Ecker (n 15); Y Zu, ‘Developing VAT Treaties: International Tax Cooperation in Times of Global Recovery’ (2021) Legal Studies 1, 159–177 <https://doi:10.1017/lst.2021.37>.

¹⁸ The US, however, does have state-level retail sales taxes.

¹⁹ OECD Guidelines (n 8) 15.

²⁰ ibid. 22.

²¹ Cockfield, A et al. , Taxing Global Digital Commerce (Kluwer Law International 2013) 65Google Scholar.

²² Under income taxation, the two nexuses overlap and two jurisdictions have the legitimate right to impose tax. The jurisdictions in question usually resolve the overlapping claims by way of a bilateral income tax treaty in which they agree to a division of taxing rights, with treaties usually based on either the OECD, Model Tax Convention on Income and on Capital 2017 (OECD Publishing 2019) (OECD Model) or United Nations, Model Double Taxation Convention between Developed and Developing Countries 2021 (United Nations 2021) (UN Model) or both.

²³ Allowing the destination country to tax creates a level playing field for all businesses in the same market.

²⁴ This is what happened in R v Dawn's Place Ltd (2006) FCA 349. In this Canadian case, the appellant, Dawn's Place Ltd, operated a website permitting the downloading of adult content images and video files on payment of a subscription fee. The contentious issue was whether the supply was made to the consumer at the point the copyrighted material was viewed or at the point at which it was made available for transmission.

²⁵ Cloud computing, for example, supplied by a business in one country to a customer in another will not be readily known to the tax authority of the other country since there is no ‘border’ in the virtual cloud.

²⁶ James (n 12) 78–79.

²⁷ ibid 48. See also Millar (n 15) 10.

²⁸ OECD Guidelines (n 8) 14–15; James (n 12) 76.

²⁹ OECD Guidelines (n 8) 15. For a detailed discussion of the invoice-credit method, see James (n 12) 70–77. While the invoice-credit method is applied by almost all jurisdictions, another method, the subtraction method, is used by Japan. Under the subtraction method, VAT is levied on an accounts-based measure of value added determined as the difference between the value of purchases and the value of outputs. See LP Ebrill, M Keen and VJ Perry, The Modern VAT (International Monetary Fund 2001) 20–2.

³⁰ For example, the EU place of taxation rules differ between supplies of goods and supplies of services. For services, the place of supply determines the place of taxation. By contrast, New Zealand uses the place of supply rule as a first step to determine the place of taxation. Cockfield et al (n 21) 253–54.

³¹ In the EU, from 1 January 2015, electronic services, telecommunications and broadcasting are taxed where the customer is established, has its permanent address or usually resides. Council Implementing Regulation (EU) No 1042/2013 (amending Implementing Regulation (EU) No 282/2011 regarding the place of supply of services) art 1 (see insertions of arts 24a–24f to Implementation Regulation (EU) No 282/2011). Specific place of supply rules are applied based on whether the supply is a B2B or B2C supply. Notably, art 24a applies to both B2B and B2C supplies, while art 24b applies only to B2C transactions. See Council Implementing Regulation (EU) 2017/2459 (amending Implementing Regulation (EU) No 282/2011) art 1 (adding specific requirements to art 24b of the Council Implementing Regulation (EU) No 282/2011)).

³² In Australia there is no single place of supply rule, and instead one must consider the ‘connected with the indirect tax zone’ rules, the GST-free rules, the input tax credit entitlement rules, and the relationship with the concept of an enterprise carried on in or outside Australia. For a comparative discussion of the Australian and New Zealand place of taxation rules, see Cockfield et al (n 21) 258–60, 264–8. For Singaporean rules, see The Goods and Services Tax Act (Singapore Cap 117A) sections 13, 15. Digital services supplied by overseas suppliers to Singapore became taxable from 1 January 2020. Inland Revenue Authority of Singapore, ‘GST on Imported Services’, <https://www.iras.gov.sg/irashome/GST/GST-registered-businesses/GST-and-Digital-Economy/GST-on-Imported-Services/>.

³³ For a thorough analysis of the approaches, see R Millar, ‘Echoes of Source and Residence in VAT Jurisdictional Rules’ in M Lang et al (eds), Value Added Tax and Direct Taxation: Similarities and Differences (IBFD Publications 2009) 275–321.

³⁴ OECD Guidelines (n 8) Ch 3.

³⁵ ibid. Guidelines 3.2 and 3.6. In some circumstances where a supply is made to a business entity that has multiple establishments in different jurisdictions, an additional analysis is needed to determine which of the jurisdictions has the taxing right over the services. OECD Guidelines (n 8) 44–5.

³⁶ OECD Guidelines (n 8) Guideline 3.5.

³⁷ This is the case whether the supply of services will be further supplied onward by the customer to a third party or is instead directly provided to a third party or paid for by a third party. OECD Guidelines (n 8) 49–64.

³⁸ OECD Guidelines (n 8) 78–9. These specific rules are needed in those circumstances where using general rules could not achieve destination taxation.

³⁹ K James and T Ecker, ‘Relevance of the OECD International VAT/GST Guidelines for Non-OECD Countries’ (2017) 32 Australian Tax Forum 317, 360; Millar (n 33) 284.

⁴⁰ Such objective is considered a principle of good tax design. See, eg Commonwealth of Australia, Australia's Future Tax System: Report to the Treasurer (December 2009) Pt 1, 17; J Mirrlees et al, Tax by Design: The Mirrlees Review vol 2 (OUP 2011) 22; MP Devereux et al, Taxing Profit in a Global Economy (OUP 2021) 53–5.

⁴¹ Cockfield et al (n 21) 235–374. The book notes rules and measures adopted by some earlier reformers such as Australia and the EU.

⁴² For example, Australia amended its GST law effective 1 July 2017 to impose GST on intangible supplies, such as supplies of digital content, games and software as well as consultancy and professional services, provided by foreign suppliers to Australian consumers. A New Tax System (Goods and Services Tax) Act 1999 (Cth) sections 9–10(2)(b), 9–25(5); Australian Treasury, ‘Tax Laws Amendment (Tax Integrity: GST and Digital Products) Bill 2015: Exposure Draft Explanatory Material’ <https://treasury.gov.au/sites/default/files/2019-03/C2015-026_EM_Tax_Integrity_GST_and_Digital_Products.pdf>.

⁴³ For example, the EU VAT law defines electronically supplied services as those ‘which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology’. See Council Implementing Regulation (EU) 282/2011 of 15 March 2011 (laying down implementing measures for Directive 2006/112/EC on the common system of value added tax) art 7(1). Similarly, Japan's Consumption Tax Act defines the provision of electronic services broadly with examples of included supplies and of exclusions. National Tax Agency (Japan), Revision of Consumption Taxation on Cross-border Supplies of Services (May 2015, revised December 2016) <https://www.nta.go.jp/english/taxes/consumption_tax/cross-kokugai-en.pdf>.

⁴⁴ Council Implementing Regulation (EU) 282/2011 of 15 March 2011, art 7(2). For Japan's rules, see National Tax Agency (Japan) (n 43).

⁴⁵ For example, in South Korea, digital services have been expanded to include advertising services, cloud computing, and intermediary online-to-offline services from 1 July 2019 (previously limited to ‘content-oriented’ transactions). KPMG, VAT/GST Treatment of Cross-border Services: 2017 Survey (KPMG International November 2017) (KPMG 2017 Survey) 7; KPMG, Taxation of the Digitalized Economy: Developments Summary (KPMG 22 July 2021) 141.

⁴⁶ An example is New Zealand. See Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (effective 1 October 2016 for online services) sections 55 (introducing new section 8B, remote services, into the Goods and Services Tax Act 1985 (NZ)) and 72 (introducing new sections 60C and 60D, electronic marketplaces, into the Goods and Services Tax Act 1985 (NZ)). See also M Walpole and M Stiglingh, ‘Untangling the Worldwide VAT Web on Digital Supplies’ (2017) 32 Australian Tax Forum 429, 446.

⁴⁷ KPMG 2017 Survey (n 45) 7.

⁴⁸ Directive 2006/112/EC (of 28 November 2006 on the common system of value added tax) arts 44, 45, 58. Prior to 2015, intra-EU B2C supplies of digital services were taxed in the Member State of the supplier. See also Council Implementation Regulation (EU) No 1042/2013 (n 31) art 2.

⁴⁹ However, from 1 January 2019, the place of taxation has been modified to be the Member State of the supplier if the supplier is an EU-established business making B2C supplies of digital services as well as telecommunications and broadcasting, and the relevant supplies do not exceed a certain threshold. Council Directive (EU) 2017/2455 (of 5 December 2017 amending Directive 2016/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods) art 1(1) (see amendments to art 58(2) and (3)).

⁵⁰ Council Implementation Regulation (EU) No 1042/2013 (n 31) art 1 (see insertions of arts 24(a), 24b(d), 24f Implementing Regulation (EU) No 282/2011).

⁵¹ Council Implementation Regulation (EU) 2017/2459 (n 31) art 1 (see amendments to art 24b, para 2 of Implementing Regulation (EU) No 282/2011, effective from 1 January 2019).

⁵² Goods and Services Tax Act 1985 (NZ) (as amended 2016) section 8B(1) and (2).

⁵³ Goods and Services Tax Act 1985 (NZ) (as amended 2016) section 8(3)(c). See also Cockfield et al (n 21) 244–5, 258–60. Those services were previously not taxed.

⁵⁴ Goods and Services Tax Act 1985 (NZ) (as amended 2016) section 8B(5).

⁵⁵ KPMG 2017 Survey (n 45) 11.

⁵⁶ National Tax Agency (Japan) (n 43). Under Japan's Consumption Tax Act, if the place of supply is in Japan, the supply is taxable there. Previously the place regarding digitally supplied services was the location of the service provider.

⁵⁷ ibid.

⁵⁸ Provisional Regulations on Value Added Tax (China) (as amended 2017) art 1; Notice on Comprehensively Implementing the Pilot Reform of Replacing Business Tax with VAT (Ministry of Finance and State Taxation Administration, issued 23 March 2016, effective 1 May 2016) (Caishui [2016] 36) Annex 1, art 12(1).

⁵⁹ Caishui [2016] 36 (n 58) Annex 4, arts 1, 2, 7.

⁶⁰ ibid Annex 1, art 13.

⁶¹ ibid Annex 4, art 7. For analysis of China's place of taxation rules, see Y Xu, ‘The Destination Principle in International Trade in Services: The Chinese Experience’ in RF van Brederode (ed), Virtues and Fallacies of VAT: An Evaluation after 50 Years (Kluwer Law International 2021) 529–60, 544–5. While the determination in B2B supplies can be made based on the customer's business VAT registration information, for B2C supplies there are no specified proxies or presumptions available as a guide for foreign suppliers.

⁶² A VPN is a secure tunnel between users’ devices and the internet enabling data to be shared without impediment.

⁶³ KPMG 2017 Survey (n 45) 8. Some jurisdictions, such as Mexico and China, do not differentiate between B2B and B2C supplies. See EY (n 2) 1008; Xu (n 61) 546.

⁶⁴ Both mechanisms have been endorsed by the OECD; see OECD, Mechanisms for the Effective Collection of VAT/GST Where the Supplier Is Not Located in the Jurisdiction of Taxation (OECD Publishing 2017) (OECD Collection Mechanisms) 23, 36.

⁶⁵ The reverse charge mechanism is used in most jurisdictions to collect VAT in cross-border B2B transactions. KPMG 2017 Survey (n 45) 8. Jurisdictions using this mechanism are noted in EY 2021 (n 2) and KPMG 2021 (n 45). See also OECD Collection Mechanisms (n 64) 23.

⁶⁶ OECD Collection Mechanisms (n 64) 36.

⁶⁷ OECD Guidelines (n 8) 70–2.

⁶⁸ ibid 71–2.

⁶⁹ This mechanism is noted to have been adopted in some jurisdictions such as Australia and the EU. KPMG 2017 Survey (n 45) 20–1. See also OECD, The Role of Digital Platforms in the Collection of VAT/GST on Online Sales (OECD Publishing 2019) (OECD Digital Platforms).

⁷⁰ OECD Collection Mechanisms (n 64) 26.

⁷¹ OECD, The Impact of the Growth of the Sharing and Gig Economy on VAT/GST Policy and Administration (OECD Publishing 2021) (OECD Sharing/Gig Economy) 3–4, 41–85.

⁷² European Commission, ‘VAT One-Stop Shop’, <https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce/new-oss-schemes_en>. The simplified registration scheme, called the ‘One Stop Shop’ system, has become effective from 1 July 2021, and it was a development of the previous Mini One Stop Shop system (effective 1 January 2015). See also EY (n 2) 509–11; KPMG 2017 Survey (n 45) 10.

⁷³ ATO, ‘GST and Australian Businesses – Imported Services, Digital Products and Low Value Imported Goods’, <https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-goods-and-services/Australian-business-importing-goods-and-services/>. For reverse charge on imported B2B services, see A New Tax System (Goods and Services Tax) Act 1999 (Cth) div 84.

⁷⁴ ATO, ‘Non-resident Businesses and GST,’ <https://www.ato.gov.au/Business/International-tax-for-business/Non-resident-businesses-and-GST/>. The registration is, nevertheless, a simplified system to assist foreign suppliers in fulfilling GST reporting and collection obligations in Australia.

⁷⁵ Inland Revenue (New Zealand), ‘Supplying Remote Services into New Zealand’, <https://www.ird.govt.nz/gst/gst-for-overseas-businesses/supplying-remote-services-into-new-zealand>.

⁷⁶ ibid. See also Inland Revenue, Policy and Strategy, Special Report on GST on Cross-border Supplies of Remote Services (Inland Revenue (New Zealand) 17 May 2016) 11.

⁷⁷ KPMG 2017 Survey (n 45) 9, 23, 25, 27.

⁷⁸ For example, South Africa and Sweden (single regime of foreign registration) and Japan (tax agency). See KPMG 2017 Survey (n 45) 10, 58–9, 78; EY (n 2) 779–80, 1409–12; KPMG (2021) (n 45) 142; National Tax Agency (Japan) (n 43) 5.

⁷⁹ Provisional Regulations on Value Added Tax (China) (n 58) art 18.

⁸⁰ KPMG, VAT and the Digital Economy in China (KPMG 2016) 13, <https://assets.kpmg.com/content/dam/kpmg/pdf/2016/04/vat-and-digital-economy-in-china.pdf>. See also Xu (n 61) 558–9.

⁸¹ For Australia's rules, see ATO, ‘If You are An Electronic Distribution Platform Operator’, <https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-goods-and-services/How-to-charge-GST/If-you-are-an-EDP-operator/>; ATO, Law Companion Ruling LCR 2018/2, ‘GST on supplies made through electronic distribution platforms’. For the EU rules, see Council Implementation Regulation (EU) No 1042/2013 (n 31) art 1 (see insertion of art 9 a to Implementing Regulation (EU) No 282/2011). The EU passed legislation, making online marketplaces responsible for VAT collection on distant B2C sales of goods with application from 1 July 2021. Council Directive (EU) 2017/2455 (n 49) art 2(2) (adding art 14a on electronic interfaces such as platforms to Directive 2006/112/EC). See also European Commission Taxation and Customs Union, ‘Online Electronic Interfaces’ <https://taxation-customs.ec.europa.eu/online-electronic-interfaces_en>. For the New Zealand rules, see Goods and Services Tax Act 1985 (as amended 2016) s 60C. For the differences between the Australian and New Zealand rules and the EU rules, see KPMG 2017 Survey (n 45) 6.

⁸² EY 2021 (n 2) 1008, 1346. The Mexican and Singaporean rules have become operative from 1 June 2020 and 1 January 2020, respectively.

⁸³ KPMG (2021) (n 45) 149. The measure has been applied from 1 September 2019.

⁸⁴ ibid 145. The UK rules became effective on 15 March 2018.

⁸⁵ KPMG 2017 Survey (n 45) 19.

⁸⁶ The article uses the term ‘international guidelines’ to refer to those collective documents issued by the OECD in recent years and the term ‘OECD Guidelines’ to refer to the International VAT/GST Guidelines. The latter set up basic principles and a global standard for the VAT treatment of cross-border trade in services and intangibles, recommending place of taxation rules and collection mechanisms for jurisdictions to consider.

⁸⁷ OECD Guidelines (n 8) 4. The Global Forum participants include member countries and jurisdictions of the G20/OECD Inclusive Framework, OECD countries, 108 non-OECD jurisdictions including 67 developing economies, and a range of international and regional organizations. OECD, OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors – April 2021 (OECD Publishing 2021) 16.

⁸⁸ OECD Guidelines (n 8) 4. For a comprehensive analysis of the OECD work from the lead-up to the 1998 Ottawa Framework Conditions to draft OECD Guidelines (2006–2013) and 2012 when the first Global Forum on VAT was held by the OECD, see Cockfield et al (n 21) 193–234; James and Ecker (n 39) 335–6. For the Ottawa Framework Conditions, see OECD, Electronic Commerce: Taxation Framework Conditions (OECD Publishing 1998).

⁸⁹ For the involvement of non-OECD countries, see James and Ecker (n 39) 336–38.

⁹⁰ The subsequent guidelines include OECD Collection Mechanisms (n 64), OECD Digital Platforms (n 69) and OECD Sharing/Gig Economy (n 71) as well as the model rules for platform reporting: OECD, Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing/Gig Economy (OECD Publishing 2020) (OECD Platform Reporting).

⁹¹ OECD BEPS Action 1 (n 4) 93–4, 120–9.

⁹² OECD Guidelines (n 8) 3–4.

⁹³ OECD Collection Mechanisms (n 64) 3, 9; OECD Digital Platforms (n 69) 3, 10; OECD Sharing/Gig Economy (n 71) 3, 14; OECD Platform Reporting (n 90) 7.

⁹⁴ OECD (2021) (n 87) 16.

⁹⁵ KPMG (2021) (n 45) 79–153.

⁹⁶ See eg KPMG 2017 Survey (n 45) 6–13, 18–19, 21; KPMG (2021) (n 45) 80–153; EY (n 2) detailing 137 jurisdictions’ specific rules on cross-border digital supplies of services and intangibles.

⁹⁷ An MLE is a legal entity with establishments in more than one jurisdiction. OECD Guidelines (n 8) 44.

⁹⁸ OECD Guidelines (n 8) Guideline 3.1 (destination principle), Guideline 3.2 (B2B supplies) and Guideline 3.6 (B2C supplies).

⁹⁹ Caishui [2016] 36 (n 58) Annex 4, art 2(3).

¹⁰⁰ Directive 2006/112/EC (n 48) arts 58, 59; Council Implementation Regulation (EU) No 1042/2013 (n 31) art 1 (see insertion of 24a(1) to Implementing Regulation (EU) No 282/2011).

¹⁰¹ OECD Guidelines (n 8) Guideline 3.4, 44–9. The three methods are direct use, direct delivery and recharge methods.

¹⁰² OECD Guidelines (n 8) 49.

¹⁰³ The supplier in Her Majesty The Queen v Dawn's Place Ltd (2006) FCA 349 tracked the location of customers using their credit card bank information, a technique accepted by the court and the revenue authority (though the supply was found to have been made where the supplier was located and not the customer on other grounds, an outcome subsequently reversed by corrective legislation). See P Rendahl, Cross-border Consumption Taxation of Digital Supplies (IBFD Publications 2009) 283.

¹⁰⁴ ML Schippers and CE Verhaeren, ‘Taxation in a Digitizing World: Solutions for Corporate Income Tax and Value Added Tax’ (2018) 27 EC Tax Review 61, 67. The payment services providers can be used to help collect necessary information on cross-border transactions and to collect and remit taxes to the tax authority.

¹⁰⁵ For example, the reverse charge mechanism is widely implemented with rules varying considerably. See OECD Collection Mechanisms (n 64) 23; KPMG 2017 Survey (n 45) 18–19.

¹⁰⁶ KPMG 2017 Survey (n 45) 20.

¹⁰⁷ OECD Collection Mechanisms (n 64) 23.

¹⁰⁸ E Hadzhieva, Impact of Digitalisation on International Tax Matters (European Union 2019) 89.

¹⁰⁹ OECD Collection Mechanisms (n 64) 24.

¹¹⁰ For example, when the customer, as a private consumer or an unregistered business, claims it is VAT registered and thus eligible for input VAT credits. ibid 24–5.

¹¹¹ OECD (2021) (n 87) 16. The report shows significant revenue yields in Australia (approximately EUR 618 million in the first two years), the EU (EUR 14.8 billion in the first four years), Russia (approximately EUR 241 million in the first two years) and South Africa (approximately EUR 436 million in the first five years).

¹¹² For example, in Japan, foreign registration may not be directly available for non-resident businesses. In China and Russia, currency controls require withholding be applied. KPMG 2017 Survey (n 45) 10, 20.

¹¹³ Walpole and Stiglingh (n 46) 434–48.

¹¹⁴ European Commission, ‘Proposal for a Council Directive Amending Directive 2006/112/EC as regards harmonising and simplifying certain rules in the value added tax system and introducing the definitive system for the taxation of trade between Member States’ COM (2017) 569 final (4 October 2017). See also KPMG 2017 Survey (n 45) 19–20.

¹¹⁵ See eg E Verwaal and S Cnossen, ‘Europe's New Border Taxes’ (2002) 40 Journal of Common Market Studies 309–30; R de la Feria, ‘The EU VAT Treatment of Public Sector Bodies: Slowly Moving in the Wrong Direction’ (2009) 37 Intertax 148; C Breuer and C Woon Nam, ‘VAT on Intra-Community Trade and Bilateral Micro Revenue Clearing in the EU’ (2011) 9 eJournal of Tax Research 59; B Terra, ‘Levying VAT in the EU Customs Union: Towards a Single Indirect Tax Area? The Ordeal of Indirect Tax Harmonisation’ (2019) Erasmus Law Review 269.

¹¹⁶ These are ANDEAN Harmonization of Substantial and Procedural Aspects of Value Added Taxes (Decision 599, 2004), UEMOA VAT Directive (1998, Directive No 02/98/CM/UEMOA), and CEMAC VAT Directive (1999, Directive No 1/99/CEMAC-028-CM-03). See Ecker (n 15) 69–70; LA Arias et al, ‘The Harmonization of Indirect Taxes in the Andean Community’ (2005) Inter-American Development Bank INTAL-ITD Occasional Paper-SITI-07; M Mansour and G-R Graziosi, ‘Tax Coordination, Tax Competition, and Revenue Mobilization in the West African Economic and Monetary Union’ (2013) IMF Working Paper WP/13/163, 10–12; World Bank, ‘CEMAC Deepening Regional Integration to Advance Growth and Prosperity’ (World Bank 2018) 48–50.

¹¹⁷ KPMG 2017 Survey (n 45) 18.

¹¹⁸ OECD Guidelines (n 8) 11; OECD Collection Mechanisms (n 64) 10; OECD Digital Platforms (n 69) 9–10; OECD Sharing/Gig Economy (n 71) 14; OECD Platform Reporting (n 90) 7.

¹¹⁹ R Millar, ‘Looking Ahead: Potential Solutions and the Framework to Make Them Work’ (2016) Sydney Law School Legal Studies Research Paper No 16/30, 16.

¹²⁰ ibid 16–17, noting that VAT laws are drafted based on different design principles with a wide range of different models to implement the destination principle.

¹²¹ James and Ecker (n 39) 375–6.

¹²² The mutual agreement procedure (MAP) is prescribed in art 25 of the OECD and UN Models on income and capital. It could be argued that the express statements in arts 24 (non-discrimination), 26 (exchange of information) and 27 (assistance in the collection of taxes) indicate that those articles are not limited to covered taxes (ie taxes on income and capital) in art 2. The absence of such an express statement in art 25 could be taken to imply that its scope is limited to covered taxes. However, art 25(1) refers to ‘taxation not in accordance with the provisions of this Convention’, and thus ‘taxes’ are not limited to taxes on income and capital in the sense of art 2(2). See E Reimer and A Rust (eds), Klaus Vogel on Double Taxation Conventions (4th edn, Kluwer Law International 2015) 1786. Since the OECD and UN Models include arts 24, 26 and 27 which are not limited to covered taxes, the result would seem to follow that a taxpayer who considered that an action of a Contracting State breached art 24, for instance in relation to VAT that was not a covered tax, would be able to seek the MAP remedy under art 25.

¹²³ OECD Model (n 22) arts 9–23.

¹²⁴ UN Model (n 22) iii–xvi.

¹²⁵ Ecker (n 15).

¹²⁶ J Brumby and M Keen, ‘Tax Treaties: Boost or Bane for Development’ (World Bank Blogs, 16 November 2016) <https://blogs.worldbank.org/governance/tax-treaties-boost-or-bane-development>; R Mason, ‘The Transformation of International Tax’ (2020) 114 AJIL 353.

¹²⁷ See eg Arel-Bundock, V, ‘The Unintended Consequences of Bilateralism: Treaty Shopping and International Tax Policy’ (2017) 71 IntlOrg 349Google Scholar; Davies, J, ‘Tax Stability’ (2020) 44 MULR 424Google Scholar.

¹²⁸ P Harris and D Oliver, International Commercial Tax (CUP 2010) 18–20. The authors note that amending the two Models themselves is also a prolonged and difficult process.

¹²⁹ Actual DTAs based on the OECD or UN Model usually contain articles from 24 onwards that are applicable to other taxes for administrative cooperation. On a multilateral level, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (as amended by Protocol in 2010) applies to all taxes including VAT. OECD Guidelines (n 8) 106–7; James and Ecker (n 39) 370–5.

¹³⁰ See Ecker (n 15) 79–84.

¹³¹ For the features of VAT, see OECD Guidelines (n 8) 14–15.

¹³² Ecker (n 15) 80–2; Millar, ‘Looking Ahead: Potential Solutions and the Framework to Make Them Work’ (n 119) 18.

¹³³ Millar, ‘Looking Ahead: Potential Solutions and the Framework to Make Them Work’ (n 119) 17–21.

¹³⁴ ibid 12.

¹³⁵ On the history of tax treaties, see S Jogarajan, Double Taxation and the League of Nations (CUP 2018); J Hattingh, ‘On the Origins of Model Tax Conventions: Nineteenth-Century German Tax Treaties and Laws Concerned with the Avoidance of Double Tax’ in J Tiley (ed), Studies in the History of Tax Law, vol 6 (Hart Publishing 2013) 31–79.

¹³⁶ Non-taxation occurs when an imported supply of services is not taxed, such as where there is a lack of effective collection mechanisms in the importing jurisdiction. Non-taxation also occurs when supply of services (eg healthcare) is exempt or when it is difficult to tax the supply on its value added (eg financial services). Non-taxation of B2B cross-border supplies is less significant than B2C supplies as VAT is not meant to tax intermediate businesses, except when the business makes supplies that are exempt from VAT without credits or is an entity not required for VAT, meaning the business needs to bear VAT. Millar (n 15) 7–21; Millar, ‘Looking Ahead: Potential Solutions and the Framework to Make Them Work’ (n 119) 7, 9. For the neutrality principle, see OECD Guidelines (n 8) Ch 2. In particular, there are two guidelines, Guidelines 2.4 and 2.5, applying to the neutrality principle in international trade. OECD Guidelines (n 8) 22–4. See also Millar (n 119) 19.

¹³⁷ Millar, ‘Looking Ahead: Potential Solutions and the Framework to Make Them Work’ (n 119) 18–19.

¹³⁸ OECD, Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (adopted 24 November 2016, effective 1 July 2018) (MLI). See also OECD, ‘Signatories and Parties to The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting’ (2022) <https://www.oecd.org/tax/treaties/beps-mli-signatories-and-parties.pdf>.

¹³⁹ Ecker (n 15) 66.

¹⁴⁰ ibid 67–8.

¹⁴¹ UN Committee of Experts on International Cooperation in Tax Matters, ‘Twenty-third Session: Virtual Meetings of 19 to 28 October 2021 Item 5 (n) of the Provisional Agenda Indirect Taxes (Other than Health Taxes)’, E/C.18/2021/CRP.34, 4 October 2021. This document notes, on page 3 paragraph 3, that indirect taxes, particularly VAT, ‘was for a long time not part of the Committee's workplans, partly due to the initial general Committee focus on tax treaties, and the limited resources to expand into areas of activities there were often not part of Member's areas of expertise’. The document also shows that the UN Tax Committee considered developing guidance on indirect tax issues especially for developing countries.

¹⁴² While speculative it suggests why the world moved so quickly with the adoption of the MLI but not with a parallel VAT convention.

¹⁴³ This is also speculative, but may explain why there is a lack of leadership role from the EU.

¹⁴⁴ Ecker (n 15) 68.

¹⁴⁵ ibid.

¹⁴⁶ South Dakota v Wayfair Inc. (US) 138 S.Ct. 2080 (2018). See ‘Recent Cases, Federalism: State v. Wayfair Inc.’ (2018) 131 HarvLRev 2089; ‘Leading Cases, Constitutional Law: South Dakota v. Wayfair, Inc.’ (2018) 132 HarvLRev 277.

¹⁴⁷ At the US state level, specific sales thresholds apply to require remote sellers to collect and remit retail sales taxes which vary from state to state. Depending on the state, remote sellers may be required to collect tax on sales of services and digital goods in addition to physical goods. The variations may cause compliance burdens to both local and foreign businesses making inter-state and cross-border digital sales. KPMG (2021) (n 45) 149.

¹⁴⁸ See Turnier, WJ, ‘Designing an Efficient Value Added Tax’ (1984) 39(4) TaxLRev 435, 435Google Scholar; Tax Analysts, The VAT Reader: What a Federal Consumption Tax Would Mean for America (Tax Analysts 2011).

¹⁴⁹ China's VAT contributes more than twice the revenue of the corporate income tax, which is the second most important tax in China. See Y Xu and R Krever, ‘VAT Compliance Burdens in the OECD and China’ [2021] BTR 328, 330.

¹⁵⁰ Li, J, ‘China and BEPS: From Norm-Taker to Norm-Shaker’ (2015) 69(6/7) BFIT 355–70Google Scholar. The author notes in a more recent article that China's influence may be growing in respect of international tax governance, but the US continues to be the major power driving international tax reform. While the US seems to have shown a US-centric multilateralism in the area of international tax, it is not clear how China's ‘true multilateralism’ will play out in global tax governance. The author also notes that China relies on international tax rules to generate revenue as VAT is the largest revenue source in the country. Li, J, ‘China's Rising (and the United States’ Declining) Influence in Global Tax Governance? Some Observations’ (2021) 75(11/12) BFIT 1–17Google Scholar. See also Christensen, RC and Hearson, M, ‘The Rise of China and Contestation in Global Tax Governance’ (2022) 28(2) Asia Pacific Business Review 165–86CrossRefGoogle Scholar.

¹⁵¹ M Parkinson and B Sterland, ‘Innovations in Global Governance: Australia's G20 Presidency’ (Australian Treasury 8 October 2014).

¹⁵² OECD, ‘Signatories and Parties to The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting’ (n 138).

¹⁵³ As noted by think tank the Hinrich Foundation, the most recent remarks given by high-ranking US and EU officials imply that the era of globalisation is approaching an end as the leaders seem to intend to move to trade within a much more narrowly defined group of ‘friends’ who share common ‘values’. See S Olson, ‘Yellen, Lagarde, and the Death of the Global Trade System’ Hinrich Foundation (4 May 2022) <https://www.hinrichfoundation.com/research/article/sustainable/yellen-lagarde-global-trade-system/?utm_medium=email&_hsmi=211981082&_hsenc=p2ANqtz-9M4eQXzL6qHItVeAW_Vs-S6h8GIQapeQLMuZOP7GhQxQzS6-j9Ui60RPBmvw1rsjosZ9W69xHPtn7sseb1oq58VOXq_w&utm_content=211981082&utm_source=hs_email>.

¹⁵⁴ Li (2021) (n 150) 15.

¹⁵⁵ OECD, ‘Members of the OECD/G20 Inclusive Framework on BEPS’ (November 2021) <https://www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf>.

¹⁵⁶ An exception is Australia which has considerable political constraints on raising VAT rates or expanding VAT base.