University of Georgia School of Law Professor Assaf Harpaz presented his draft paper “Global Tax Wars in the Digital Era” at the University of Alabama School of Law as part of the Junior/Senior SEC Workshop.

Below is an abstract of the paper:

Current debates in international taxation often center on how to fairly allocate taxing rights among different jurisdictions. When an enterprise earns income abroad, the country of residence (where the taxpayer resides) and the country of source (where income is generated) have legitimate, competing claims to tax that income. The question is further complicated in a digital economy where profit shifting practices are abundant and businesses no longer require a physical presence in the location of their online consumers.

The international tax system has traditionally favored residence-based taxation. Now, international taxation is at a crossroads with intergovernmental organizations battling to redefine the principles of cross-border taxation. The regime has been dominated by the Global North through the Organisation for Economic Co-operation and Development (OECD), which has drawn backlash due to its undemocratic procedure and unfavorable outputs for developing countries. The United Nations has held a relatively peripheral role in global tax governance, which is poised to change with an upcoming UN Framework Convention on International Tax Cooperation – an initiative overwhelmingly supported by developing countries.

This article explores the “tax wars” surrounding the leadership for global tax governance, contrasting the taxing powers and interests of the OECD-led Global North with those of the UN-backed Global South. It highlights the distortive outcomes created by outdated international tax principles and argues for a shift toward source-based taxation. To do so, it proposes revisiting the permanent establishment standard in model treaty language, creating an opportunity for broader taxation of business profits in the source country. This transition will address longstanding disparities and is increasingly warranted in a digital economy that does not rely on physical presence.

Assaf Harpaz joined University of Georgia School of Law as an assistant professor in summer 2024 and teaches classes in federal income tax and business taxation. Harpaz’s scholarly focus lies in international taxation, with an emphasis on the intersection of taxation and digitalization. He explores the tax challenges of the digital economy and the ways to adapt 20th-century tax laws to modern business practices.