FUTURE TRENDS IN THE DIGITAL ECONOMY AND THEIR IMPLICATIONS FOR TAXATION

AUTHOR – MS. I. SAMSUL SAMEERA, ASSISTANT PROFESSOR AT CRESCENT SCHOOL OF LAW, B.S. ABDUR RAHMAN CRESCENT INSTITUTE OF SCIENCE AND TECHNOLOGY

BEST CITATION – MS. I. SAMSUL SAMEERA, FUTURE TRENDS IN THE DIGITAL ECONOMY AND THEIR IMPLICATIONS FOR TAXATION, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 4 (1) OF 2024, PG. 728-738, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT

The digital economy continues to evolve at a rapid pace, driven by technological advancements, changing consumer behaviours, and shifting business models. This paper explores future trends in the digital economy and their taxation implications. By analyzing emerging developments in technology, business practices, and regulatory frameworks, this research aims to anticipate how the digital landscape will shape tax policy and administration in the years to come.

One significant trend is the increasing digitization of traditional industries, leading to a blurring of boundaries between digital and non-digital activities. This trend encompasses sectors such as manufacturing, healthcare, and finance, where digital technologies are transforming operations, distribution channels, and customer interactions. As traditional businesses embrace digitalization, tax authorities face challenges in determining the appropriate tax treatment of digital transactions and ensuring compliance with existing tax laws.

Another key trend is the rise of platform-based business models, exemplified by companies like Uber, Airbnb, and Amazon. These platforms facilitate peer-to-peer transactions, connect buyers and sellers, and enable new forms of economic activity. However, they also raise complex tax issues related to revenue recognition, value creation, and the taxation of intangible assets. Tax authorities must adapt their tax policies and enforcement strategies to capture the value generated by platform economies while avoiding double taxation and distorting incentives for innovation and entrepreneurship.

Furthermore, the increasing globalization of digital commerce presents both opportunities and challenges for taxation. Cross-border transactions, digital supply chains, and remote work arrangements complicate the allocation of taxing rights among jurisdictions, leading to disputes over tax jurisdiction and revenue sharing. The emergence of digital nomadism and virtual businesses further complicates the tax landscape, requiring international cooperation and coordination to prevent tax evasion and erosion of the tax base.

In response to these trends, tax authorities are exploring innovative approaches to digital taxation, such as digital services taxes, nexus-based rules, and data-driven compliance measures. However, achieving consensus on international tax reform remains a formidable task, given the divergent interests of countries and the complexity of digital business models.

In conclusion, understanding and anticipating future trends in the digital economy is crucial for designing tax policies that promote fairness, efficiency, and compliance in an increasingly digitized world. This research contributes to the ongoing dialogue on the intersection of technology, economics, and taxation, providing insights into the challenges and opportunities that lie ahead.

KEYWORDS – Digital transformation, Blockchain technology, Artificial intelligence (AI), Tax Compliance, Tax Administration, Data-driven taxation, Digital services tax.