Debate: Taxes on Digital Services and the Substantive Scope of Application of Tax Treaties: Pushing the Boundaries of Article 2 of the OECD Model?

In response to base erosion and profit shifting by multinational enterprises, states increasingly complement their corporate income taxes with new taxes that seek to secure tax revenue otherwise lost under ordinary corporate income tax. The European Union also seems to favour a new tax on certain digital services as an interim measure, before the concept of a digital permanent establishment as the long-term tax policy goal can be agreed upon. The new taxes can be seen as either explicit treaty overrides or, more interestingly, falling outside the scope of existing tax treaties. This article examines when such new taxes really succeed in avoiding the scope of application of tax treaties and what impact they might have on the tax treaty landscape.