The crisis in public finances as a result of Covid-19 has accelerated the discussion within governments on how to increase tax revenues in a recessionary economic environment. In some Latin American states, initiatives have emerged to develop structural tax reforms in this direction.
While states are assessing the possibility of implementing such tax reforms, finance officials are discussing and advocating how to tax tax taxpayers who carry out their activities in the digital economy, as a consequence of the increase in digital business models experienced in recent years and the lack of effective taxation of these models.
In Latin America, an important group of countries have promoted the taxation of the digital economy through indirect taxation (Chile, Colombia, Uruguay, Costa Rica, Paraguay, Brazil, Bolivia, Ecuador and Mexico), given the existing consensus to tax digital services in the user's jurisdiction, unlike direct taxation where there is no international consensus on how to tax such income.
In the discussion on the taxation of income, some conclude that the development of digital business models, such as: resellers of goods (Amazon), intermediaries (Uber), Social Networks (Facebook) and the Clouds (Google) does not constitute a permanent establishment for the entity providing the service in the jurisdiction of the users or market jurisdiction. It is important to note that, under current international taxation standards, permanent establishment is essential for a jurisdiction to be able to tax non-resident entities and allocate profits attributable to that jurisdiction.