This chapter considers the key characteristics of the digitalised business models discussed in Chapter 2 and outlines seven key challenges to the current international tax system devised by the 1920s compromise. These are the vanishing ability to tax business profits, the use of data (and the corresponding difficulties of assessing contribution and value), the reliance and mobility of intellectual property, the characterisation of income, the failure of transfer pricing in certain multinational transactions, the inadequacy of residence-based taxation and, lastly, competition by states.These issues remain, making the current international tax system fragile to the expansion of highly digitalised business notwithstanding the outstanding and prompt action by the OECD on the BEPS action plan.

This chapter considers the key characteristics of the digitalised business models discussed in Chapter 2 and outlines seven key challenges to the current international tax system devised by the 1920s compromise. These are the vanishing ability to tax business profits, the use of data (and the corresponding difficulties of assessing contribution and value), the reliance and mobility of intellectual property, the characterisation of income, the failure of transfer pricing in certain multinational transactions, the inadequacy of residence-based taxation and, lastly, competition by states.These issues remain, making the current international tax system fragile to the expansion of highly digitalised business notwithstanding the outstanding and prompt action by the OECD on the BEPS action plan.