Australia’s digital economy taxation regime must be carefully thought out by determining where the value is being created

The uncertainty surrounding Google’s proposed $20 billion data-centre investment in Australia is not really about tax. It is about a more basic question: Where is value created in the digital economy?

Google is reportedly seeking clarity about how a large data-centre hub would be taxed, including whether it would be treated as a “permanent establishment” and expose more of its profits to the 30 per cent company tax rate. That concern is reasonable, as it exposes a deeper incoherence in how governments are thinking about taxing digital firms.

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