The principles of taxation for digital economy

TERRA ECONOMICUS, , Vol. 20 (no. 2),

The paper deals with the principles of taxation in the context of an economy’s digitalization. The new Industrial revolution and digitalization are changing subjects of tax relations and the tax base, and, accordingly, the very ideas about the principles on which taxes should be built. In this regard, it is proposed to distinguish between a conditionally fixed and variable part in principles of taxation. The conditionally fixed part includes classical canons of benefit (the benefit principle) and solvency (the ability-to-pay principle), which have been widely recognized by many generations of scientists and practitioners. Their relative consistence is defined by the fact that the tax theory deals with the people’s behavior and human relations, but not with the production mode. The conditionally variable part includes principles, associated with minimizing costs of access to the tax base. In the context of digitalization, these are: obtaining secure digital information about business transactions in real time; digital algorithmization and automation of taxation; calculation and payment of taxes under smart contracts in accordance with economic policy’s imperatives of the state. They are conditional variables, because under the influence of technological progress, the tax base and conditions for minimizing the costs of its use are being transformed. It also was established that requirements for taxes and tax policy depend on the technologies’ life cycle. In its early stages, they need the most tax support. Such a support is more important for catching up countries than for advanced ones, since emerging economies do not have sufficient experience in promoting technological innovations, relevant institutions and high incomes, generated by mature technologies of previous generations. To stimulate new technologies, it is advisable to implement not only vertical (sectoral) measures (such as tax incentives for the microelectronics sector), but also horizontal (system-wide) and matrix (mixed) measures that take into account national and regional technological priorities.
Citation: Vishnevsky V.P., Goncharenko L.I., Dementiev V.V., Gurnak A.V. (2022). The principles of taxation for digital economy. Terra Economicus 20(2), 59–71 (in Russian). DOI: 10.18522/2073-6606-2022-20-2-59-71

Keywords: tax; principles of taxation; industrial revolution; digitalization; tax incentives; tax policy

JEL codes: H20, H30

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606