When in 1915 Albert Einstein developed the general theory of relativity, providing a unified description of gravity, the impression was that said theory applies to big objects (like stars) as well as to small objects (subatomic particles). But during the following 15 years it was discovered that in the “small world” (subatomic particles) the Einstein’s theory would no longer be valid being said world ruled by the so called “quantum mechanics”.

In other words, it appeared that the principles ruling the “big world” were different from those applicable in the “small world” and every time scientists tried to combine the general relativity with the quantum mechanics (recte, their respective equations) they came to nonsense results. At that stage, it was clear that there should be a superior theory — not yet discovered — that could explain how the two theories could work together (the so-called “theory of everything”).

In 2015, it seems that the taxation criteria applicable both to the “traditional economy” and to the digital economy has come to a similar crossroad posing the same main question to the OECD and G-20 countries: is the existent taxation framework (for direct and indirect taxes purposes) sufficient to grant fair taxation level for both “two economic worlds”? Or is it necessary to tackle separately, from a tax perspective, these two worlds and apply different rules in order to avoid BEPS?

In the context of the 15-point Action Plan defined in 2013 by OECD in order to address base erosion and profit shifting (“BEPS”), Action 1 deals with the tax challenges of the digital economy. Following the release in September 2014 of the interim report named “BEPS Action 1: address the Tax Challenges of the Digital Economy”, on Oct. 5, 2015, OECD released the final report concerning BEPS in the digital economy under analysis (“BEPS — Addressing the Tax Challenges of the Digital Economy”, hereinafter the “Digital OECD Report”).

Regarding the general approach to be followed in order to face the digital economy, the final OECD report, published Oct. 5, 2015, is quite clear. It states that “because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes. The digital economy and its business models present however some key features which are potentially relevant from a tax perspective.”

According to the OECD, the digital economy is today characterized by different business models but at the same time there is no need to tax said models in a completely different way from the rest of the economy because the digital economy is becoming the economy itself.

This seems to be the main leitmotiv underneath the OECD approach also for BEPS purposes connected to the digital economy.

As noted, BEPS concerns are raised by situations in which taxable income can be artificially segregated from the activities that generate it, or in the case of value added tax (VAT/GST), situations in which none or an inappropriately low amount of tax is collected on remote digital supplies to exempt businesses or multi-location enterprises (MLEs) that are engaged in exempt activities. BEPS activities also distort competition, as corporations operating only in domestic markets or refraining from BEPS activities may face a competitive disadvantage in respect of multinational enterprises (MNEs) that are able to avoid or reduce tax by shifting their profits across borders.

According to the Digital OECD Report, the above-mentioned amendments to the PE notion provided by the already existing double tax treaties should be performed in synchronized and efficient manner and are expected to be concluded by the end of 2016.

In the light of the above, it is crystal clear that the “tax path” of the digital economy has been shaped: only a synchronized revision of the international tax rules (mainly, of the double tax treaty provisions) can grant the achievement of a fair taxation level also in the digital economy and address BEPS.

Stay tuned because 2016 seems to be the year when the “tax theory of everything” — which will encompass both the traditional economy and the digital economy — will be actually developed.