Testing for Consistency: Certain Digital Tax Measures and WTO Non-discrimination

Abstract

Few issues have challenged tax policymakers and commentators as much as digital taxation has in recent years. Ongoing efforts to reconstruct the rules of international tax to “properly” govern the taxation of the global digital economy have evoked some important tax and trade related considerations. As regards the latter, unilateral attempts by various states – partly spurred on by a lack of multilateral consensus – to tax nonresident digitalized businesses threaten to disrupt international trade relations, with threats of trade war exchanged between some World Trade Organization (WTO) member states over the propriety of the proposed tax measures. As the conversation on the underlying tax issues progresses, this article examines the consistency of some features of the various unilateral digital tax measures with the fundamental WTO principle of non-discrimination, as contained in the General Agreement on Trade in Services (GATS). Using the French Digital Service Tax (French DST) as a focal point, the article argues that there is a case to be made that some common features of the unilateral digital tax measures violate either the most favored nation or national treatment rules of WTO non-discrimination.

Keywords: OECD BEPS, International Tax, International Trade, Digitalization, E-Commerce, WTO, GATS, Non-discrimination, Most Favoured Nation, National Treatment, Digital Trade