Abstract:
Digitalization has brought many changes to our society where the Information
Communication and Technology (ICT) Sector developments influenced all others
business sectors. It has also invented such revenue generation system that states are
unable to levy tax on this sector. The business models of this sector are also a challenge
due to unique nature of generating revenue. The traditional taxation approach of value
creation and physical presence under corporate taxation is of no relevance in this
context. Jurisdictions globally failed to allocate profits of this sector and also the Base
Erosion and Profit Shifting (BEPS) issues where the states are being deprived of taxing
this sector. The global development of BEPS project by G20/OECD to develop
international legal and taxation framework to overcome these problems by amending
the Double taxation treaties(DTTs) between states after ratification of Multilateral
instrument(MLI) by states. India, UK and EU has ratified the MLI and also part of
BEPS project and done legislation to levy tax on Online Working Entities (OWE’s) as
minimum tax. Pakistan as a state is also unable to levy tax on OWE’s and deprived
from tax revenues at large. Pakistan is signatory of MLI but did not ratified it and no
legislation has been done unilaterally to collect taxes from OWE’s. There are some
states which have reached some policy measures and legislation to charge tax from
OWE’s unilaterally and also given the gateway to collect revenue from OWE’s. This
thesis will explore the options for legislation to bring OWE’s into tax net in Pakistan
under the comparative approach.
