|Can we Live Apart? The Effects of Technological Decoupling||Tec(h)tonic Shifts in Taxation
||Discovering Solid Legal Foundations for Central Bank Digital Currencies|
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Many of the shifts accelerated by the pandemic have been underpinned by an increasing reliance in our daily lives on high-tech goods and services. Trade and the access to frontier knowledge in precisely these high-tech sectors has at the same time become a focal point of longer-standing trade tensions between major economies. This confluence of factors brings urgency to the quest to understand the potential implications of technological decoupling for living standards around the world. This talk discusses channels through which technological decoupling can affect growth, and presents some estimates based on a range of possible decoupling scenarios. The talk is based on a recently-published working paper (WP/21/69).
At the heart of the ‘digital’ tax debate is the view held by some governments that their citizenry is remotely contributing to the soaring profits and stock market capitalization of large tech companies. These businesses collect valuable information from their citizens while consuming digital services—which is then is then processed and monetized through personalized advertising and product development. Thus citizens contribute to the profits of highly digitalized businesses, and some argue without adequate compensation to the users or their governments. This has prompted calls for ‘fairer’ taxation.
While reaching agreement on international tax reform under the Inclusive Framework on BEPS is still underway, several countries have begun to adopt digital services taxes (DST) on the revenues earned by highly digitalized businesses. And as governments look to finance their economic recoveries, DSTs may seem attractive. COVID-19 containment measures have pushed greater amounts of activity online, favoring highly digitalized businesses that have seen soaring stock market valuations and significant growth in earnings, while the rest of the economy has suffered. This talk will discuss the economic rationale and implications of such digital service taxes.
Many central banks of the IMF membership are studying or preparing the introduction of a digital currency. As any form of money, digital currency will require a sound legal basis From a public law perspective, this requirement operates at two levels. First, central bank laws need to authorize the issuance of such a form of currency—for most central banks, this is not the case today. Second, monetary laws need to be clear on the currency status of CBDCs. In that regard, legal tender status will be an important variable that needs to be considered, without overstating its importance. The legal treatment of CBDCs under central bank and monetary laws will depend on its design features and from a legal point of view, the distinction between account-based and token-based CBDC has the most significant implications. The presentation will walk through an analytical model to address these issues.