Comparative legal study of online working entities regarding tax administration in Pakistan

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.