LEGAL FRAMEWORKS AND TAX COMPLIANCE IN THE DIGITAL ECONOMY: A FINANCE PERSPECTIVE

Authors

  • Beatrice Oyinkansola Adelakun Independent Researcher, Illinois, USA
  • Joseph Kuba Nembe Independent Researcher, New York, USA
  • Bisola Beatrice Oguejiofor Independent Researcher, Lagos, Nigeria
  • Chidiogo Uzoamaka Akpuokwe Independent Researcher, Seattle, USA
  • Seun Solomon Bakare Grotius Centre for International Legal Studies, Faculty of Law, Leiden University, Netherlands

DOI:

https://doi.org/10.51594/ijae.v6i3.900

Abstract

In the wake of rapid digitalization, the landscape of commerce has undergone a profound transformation, presenting unprecedented challenges to traditional tax systems and legal frameworks. This abstract examines the evolving dynamics of tax compliance within the digital economy through the lens of finance. The digital economy encompasses a broad spectrum of economic activities facilitated by digital technologies, including e-commerce, digital platforms, and virtual currencies. These innovations have blurred the boundaries of traditional tax jurisdictions, leading to complexities in determining tax liabilities and enforcement mechanisms. As such, the adequacy of existing legal frameworks in addressing tax challenges posed by the digital economy has come under scrutiny. From a finance perspective, ensuring tax compliance in the digital economy involves understanding the intricate interplay between technology, business models, and regulatory frameworks. Digital businesses often operate across multiple jurisdictions, exploiting loopholes and jurisdictional discrepancies to minimize tax obligations. Such practices have raised concerns regarding tax fairness and the erosion of tax bases, prompting policymakers to explore new regulatory approaches. One key aspect of addressing tax compliance in the digital economy is the development of international cooperation and coordination mechanisms. Given the transnational nature of digital transactions, effective tax enforcement requires collaboration among countries to combat tax evasion and profit shifting. Initiatives such as the Base Erosion and Profit Shifting (BEPS) project by the OECD seek to establish common standards and guidelines for taxing digital businesses. Moreover, the emergence of innovative technologies, such as blockchain and artificial intelligence, presents both opportunities and challenges for tax authorities. While these technologies offer potential solutions for enhancing tax administration and enforcement, they also introduce new complexities, such as the anonymity of transactions and the difficulty of tracking digital assets. Navigating the complexities of tax compliance in the digital economy requires a multifaceted approach that integrates legal, technological, and financial perspectives. By fostering international cooperation, leveraging technological innovations, and adapting regulatory frameworks, policymakers can mitigate tax challenges and promote a fair and sustainable tax system in the digital age.

Keywords: Tax, Digital Economy, Finance, Legal, Review.

Published

2024-03-17

Issue

Section

Articles