0 comments on “Simplilearn to Train College Recruits on Digital Economy Skills (India)”

Simplilearn to Train College Recruits on Digital Economy Skills (India)

Mission-critical skills such as big data, machine learning, artificial intelligence, cloud computing, and digital marketing are ones that enterprises are increasingly turning to fresh graduates to fill

Campus and entry level recruiting is a critical component of every corporate HR strategy but often involves many months of onboarding and mentoring to get these employees productive. Simplilearn offers a New-Hire Training Initiative that significantly shortens this time-to-productivity via a structured training curriculum for campus recruits that they can complete before their first day on the job, or within their first couple of weeks.

Simplilearn focuses exclusively on digital-economy skills such as big data, machine learning, artificial intelligence, cloud computing, and digital marketing. These mission-critical skills are also ones that enterprises are increasingly turning to fresh graduates to fill.

Simplilearn’s new program enables organizations to help their recent on-campus recruits become job-ready (and even certified) with necessary technology skills, gained through Simplilearn’s online training courses prior to onboarding of the new employee.

“Campus hiring has never been more critical. With today’s rapid technology changes, it has become essential to ensure young professionals are up-to-date with the digital skills they will need to have an immediate impact at their new companies,” said Krishna Kumar, Founder and CEO of Simplilearn.

“Offering our vast experience in the latest technologies, Simplilearn is well-suited and proud to help Fortune 500 companies and other organizations bridge the gaps in skills and productivity that often come when onboarding new employees fresh from academia,” he added.

During their final semester in their college or university degree programs, recruits will undertake this training, following predefined learning paths that match their upcoming job roles. In addition to online videos and instructor-led lessons, the courses also include practical applied projects and assessments that are relevant in the high-demand fields such as data analysts, programmers, developers,

Simplilearn has partnered with leading IT/ITes, consulting, internet retail companies and Global System Integrators to support their new hire training initiatives. Also, as part of the company’s core offerings, the Simplilearn Digital Transformation Academy covers all aspects of people, process and technology to help organizations achieve competencies in digital technologies and applications.

The Digital Transformation Academy is designed to be customizable across a wide variety of industries and for all employee and management levels and roles while delivering on Simplilearn’ s outcome-centric, high engagement learning approach.

source: www.dqindia.com

0 comments on “Digital Economy is the Key to Realizing Indonesia into the Big Five of the World Economy”

Digital Economy is the Key to Realizing Indonesia into the Big Five of the World Economy

IndonesiaIn an oration entitled “Leap Frog Indonesia Through Digital Economy”, Rudiantara revealed that the development of a digital economic ecosystem is the key to realizing the nation’s economy towards the ranks of the world’s top five economies.

“The experience of a number of startup companies or startups that have grown up like Gojek, Tokopedia, Bukalapak and Traveloka shows that information and communication technology is the main booster rocket that can make a leap frog from zero, passing many stages at once, “To reach a point farther than what other conventional companies can achieve,” said Rudiantara.

To overcome the widening welfare gap in the world today, Rudiantara also urged the world to carry out a global movement. This has been conveyed by Rudiantara at the International Telecommunication Union (ITU) forum in Korea.

One way is through the adoption of innovative digital economic business models and strategies to enable shared economy, digitalization of labor, and financial inclusion. This proposal departs from the experiences of a number of Indonesian startups which prove that digitalization can be directed towards empowering the workforce through new ways.

Rudiantara also mentioned that the digital economy in Indonesia in 2020 is expected to reach 130 billion US dollars or Rp 1,831 trillion. With these achievements, the next two years the digital economy will contribute around 11% of Indonesia’s gross domestic product.

“But of course it’s not as easy as turning your palm to achieve all of that. There are at least seven main issues in the digital economy that must be a common concern. These seven issues are human capital, startup funding, taxation, cyber security, ICT infrastructure, consumer protection, and logistics, “said Rudiantara.

According to Rudiantara, what the government has to do to meet the big changes in the economy and business is to cut regulations a lot and create an ecosystem that provides broad opportunities for innovation to develop.

Rudiantara added, leadership in the digital era must be pursued with at least three principles, namely less of a regulator, by simplifying regulations, simplifying and eliminating permits; more of a facilitator, by providing affirmative policies in developing infrastructure, encouraging digital entrepreneurship, and growing digital economic talents; and more of an accelerator, by accelerating the growth of new digital startups and other business sectors, especially MSMEs.

“The government and the education world must work hand in hand to grow and assist young people to have a passion for technology and become a workforce that has digital skills that are able to view community problems as a challenge to be solved and monetized,” said Rudiantara.

Some time ago, Gojek Indonesia launched Go-Viet in Hanoi, Vietnam. According to Rudiantara, this showed the ability of the nation’s younger generation to solve the problems of modern humanity.

“In the range of the digital economy that is still very young, our nation’s younger people have been able to carve out legacy that is not only sweet to remember, but also surely will inspire the achievements of other nationals in the digital realm of the world,” said Rudiantara.

According to him, this phenomenon also proved that digital space in Indonesia has the same opportunities as other countries in the world. In an increasingly digital world, the perspective of the market must be broader.

Meanwhile, to help prepare Indonesia’s human resources in supporting digital transformation and improving the digital economy, in the near future the Ministry of Communication and Information will launch “Digital Talent Scholarship”. This program is in the form of intensive training scholarships by holding five universities in Indonesia, including Unpad.

source: www.unpad.ac.id

0 comments on “China will invest US$14.6 bil to develop digital economy”

China will invest US$14.6 bil to develop digital economy

chinaChina will invest 100 billion yuan (about US$14.6 billion) for developing the digital economy in the next five years, according an agreement signed at the International Conference on the Digital Economy and the Digital Silk Road.

The investments will go to projects on big data, internet of things (IoT), cloud computing, smart cities and the digital Silk Road, according to an agreement signed by China Development Bank and the National Development and Reform Commission.

The development of the digital economy has been listed as an important task for building modern economic set up in China and to achieve high quality development.

China has achieved much progress in this area over the past few years, by way of rolling out a raft of measures, which included a national big data strategy.

A report released by Cyberspace Administration of China said the country’s digital economy grew to 27.2 trillion yuan last year, up 20.3% year-on-year, and accounted for 32.9% of  its Gross Domestic Product (GDP).

The two-day International Conference on the Digital Economy and the Digital Silk Road, held in Hangzhou, a scenic city in east China’s Zhejiang Province, opened  on Tuesday.

source: ww.theedgemarkets.com

0 comments on “Vodafone claims UK’s first live holographic 5G call”

Vodafone claims UK’s first live holographic 5G call

vodafone efVodafone showed off its 5G prowess on Thursday by conducting what it claims is the U.K.’s first ever live holographic call using 5G technology.

The call was carried out between the telco’s Manchester office and Newbury headquarters, and featured England women’s football captain Steph Houghton appearing on stage in hologram form to give football tips to a young fan.

It would be easy to dismiss the demonstration as a gimmick, but Vodafone insisted that it points to exciting possibilities that next-generation mobile technology can bring to sport, such as remote coaching and training, as well as opportunities for richer interaction with fans.

“Vodafone has a history of firsts in UK telecoms – we made the nation’s first mobile call, sent the first text and now we’ve conducted the U.K.’s first holographic call using 5G,” said Vodafone UK CEO Nick Jeffery, in a statement.

Of course, holographic 5G calling is only possible when there is a network in place, and with that in mind, Vodafone shared plans to roll out infrastructure in Cornwall and the Lake District next year, and to have 1,000 5G sites up and running nationwide by 2020.

In addition to showcasing 5G, Vodafone also launched new initiatives and tariffs targeted at small businesses and entrepreneurs.

These include a new digital incubator in Manchester; a £300,000 Techstarter award for innovative technology with a social purpose; and a mentorship programme in partnership with Oxford University Innovation called Bright Sparks.

Meanwhile, Vodafone UK’s retail and contact centre staff will be given the opportunity to learn coding via the operator’s new Code Ready scheme. The company is also launching the Vodafone Digital Degree, which combines a computer science degree from the University of Birmingham with a tech apprenticeship at Vodafone.

For small business customers, Vodafone on Thursday launched what it calls a self-optimising tariff that automatically moves subscribers to the most cost-effective plan. It also unveiled Gigacube, a mobile WiFi hotspot that supports up to 20 connections. Vodafone is pitching it to pop-up businesses like shops and restaurants, and companies setting up temporary satellite offices.

“The initiatives we’ve launched today are designed to ensure that everyone can benefit from the digital technologies transforming how we live and work. From our customers and employees, to university students, digital entrepreneurs and businesses, we want to help people across the UK get ready for a digital future,” Jeffery said.

source: www.totaltele.com

0 comments on “How cybersecurity and data storage laws could pull the plug on Southeast Asia’s digital economy”

How cybersecurity and data storage laws could pull the plug on Southeast Asia’s digital economy

southeast-asiaJeff Paine says governments in Southeast Asia are keen to capitalise on the opportunity presented by the digital economy, but their rush to regulate data flows and storage will hit start-ups and small local firms hard.

Southeast Asia is one of the most diverse regions in the world, a handful of countries with thousands of languages and cultures, yet all having one thing in common – bold ambitions for their digital economies.

From the establishment of digital agencies like Malaysia Digital Economy Corporation in Malaysia and the Digital Economy and Promotion Agency in Thailand, to charting impressive road maps such as Thailand 4.0 and Making Indonesia 4.0, many governments in the region are prioritising capturing as much of the region’s US$200 billion digital economy opportunity as possible.

What isn’t clear is how these bold aspirations will be achieved.

Despite the inherent benefits of digital technologies and the internet, many governments are pursuing policies that will limit the use of these technologies. Driven by pressure to address specific and immediate challenges including cybersecurity, data protection, privacy and misinformation, governments fail to consider the long-term impact of these laws on economic growth, jobs and investment.

Vietnam’s recent Law on Cybersecurity and Indonesia’s Government Regulation 82 are examples of this, with provisions including restrictions on data flow and content, requirements for foreign companies to set up local offices and local data storage requirements. Meanwhile, proposed rules in Thailand subject over-the-top (OTT) service providers to tax, security and content regulations.

The impact of these regulations goes far beyond the information and communications technology industry, given that virtually every business today uses the internet and digital technology.

For foreign businesses, restrictive, too broad and unclear regulations create uncertainty and an unfriendly investment climate. Multinational companies unable to make long-term financial decisions are likely to shift their investments to countries with more flexible regulatory environments that support the development of a digital ecosystem.

Local businesses, like small and medium-sized enterprises and entrepreneurs that comprise 95 per cent of Southeast Asia’s economy, will bear the brunt of poor policies. Restrictions on cross-border data flows, digital tax and local data storage, will prove difficult to comply with.

Many small businesses depend on digital services and platforms such as cloud for data storage and collaboration, online marketplaces for e-commerce, social media for communication and marketing, and OTT platforms to reach customers at scale. Such laws will increase the cost of doing business, create barriers for expansion beyond borders and are likely to block small players from competing in the global marketplace.

For example, if a neighbouring country enacted similar provisions to Vietnam’s cybersecurity law, a Vietnamese software start-up would be unlikely to be able to afford data storage facilities and local offices in locations outside Vietnam – curbing regional or global expansion plans.

With significant economic prospects at stake, and the challenges of security, privacy, data and misinformation in mind, governments must find better ways to manage risk without hampering growth.

Southeast Asian governments can learn from how larger, developed economies manage emerging technology. For example, Thailand has looked towards the European Union’s implementation of the General Data Protection Regulation as a basis for their data protection laws.

On taxation, intergovernmental organisations such as the Organisation for Economic Co-operation and Development provide useful guidance in key areas such as the need to create consistency between countries on cross-border digital taxes. Unilateral moves like Australia’s goods and services taxin July 2018 on low-value imported goods is likely to pose compliance challenges and higher costs for small businesses in the long run.

Instead, a cross-sectoral range of agencies, ministries and industry players could together craft comprehensive policies that manage risk and promote growth. A good example of this is Singapore’s approach to digital taxation and preventing misinformation.

The digital economy is uncharted territory for most. There is a small window of opportunity now to ensure smart regulations and policies are in place to secure future growth. Technology companies and industry groups can work with governments, ensuring that the opportunities and benefits of the digital economy are realised and not wasted.

source: www.scmp.com

0 comments on “Irish education system needs ‘profound changes’ to secure digital future”

Irish education system needs ‘profound changes’ to secure digital future

The managing director of Accenture Ireland has warned that Ireland needs to make “profound” changes to its education system to ensure the country is equipped to secure the next wave of jobs in the digital economy.

Alastair Blair, who is also chair of Ibec’s digital economy policy committee, says the advent of artificial intelligence, virtual reality and augmented reality may require a move to a more modular education system to ensure the future workforce has the necessary depth and breadth of skills.

“Traditionally, Ireland has had access to deep skills and the availability of a young and educated workforce,” said Blair, who believes the protection of digital jobs requires a long-term commitment from government, academia and industry working together.

“There is a real opportunity for Ireland to position itself well. However, there is a need for a profound change to our education system to take advantage of the next wave of jobs,” he said.

Blair said Accenture, which acquired Irish creative agency Rothco for a reported €20m this year, is targeting further acquisitions as it is set to mark 50 years in Ireland.

source: www.independent.ie

0 comments on “Germany – Digital Economy Monitoring report 2018”

Germany – Digital Economy Monitoring report 2018

germany DEMR 2018

The DIGITAL Economy Index provides a number to show the level of digitalisation in the
German economy. It is based on a survey of high-ranking decision-makers from 1,061
businesses. Three aspects are incorporated in the economy index: the use of digital
devices, the state of internal company digitalisation, and the effect of digitalisation on the company.

Report here and  Library

source: www.zew.de

0 comments on “Competition challenges in the digital economy”

Competition challenges in the digital economy

Competition21-750x400Slow productivity growth and rising income inequality have shaped the world economy in a time of rapid technological change. A variety of explanations have emerged to help us understand these related trends, but one overarching theme is the decline in competition.

The combination of increasingly concentrated markets, rising market power of large firms, and slowing business dynamism suggest that competition among firms is weakening. The concern is that the rise of dominant firms will hinder the diffusion of technology and exacerbate income inequality.

Adding to these concerns are two key features of the digital economy—the potential for scale with digital platforms and the growing importance of intangible capital—that, by their very nature, lend themselves to bigger and more dominant firms.

These characteristics of the digital economy present challenges on how we think about and implement competition policy. Policies aimed at ensuring a level playing field and fostering a dynamic and inclusive economy will therefore need to adjust to better reflect a growing reality.

POTENTIAL FOR SCALE WITH DIGITAL PLATFORMS

First, market concentration is especially high in markets with large returns to scale and network effects. Going digital can come with high capital expenditures, like setting up data centers and other digital infrastructure. But it also comes with the ability to reproduce digital offerings instantly and at low or zero marginal cost, implying large returns to scale and lower prices for consumers. When network effects are involved, the potential returns to scale are even greater.

The argument for bigger firms in these markets is that consumers are the biggest winners. Free digital services and a plethora of user data used to customize and cross-sell products help raise consumer welfare and offer greater choice. (In some cases, firms controlling “big data” can extract more consumer surplus through sophisticated algorithmic pricing and customization of offerings.)

Small businesses and entrepreneurs also benefit, the argument goes. Digital giants like Amazon, Google, and Microsoft, among others, reduce startup costs for small firms by offering cloud services and open-source software, make it easier to reach distant markets through their platforms, and offer venture funding and financing.

Due in part to the potential to scale up quickly, the threat of disruption is higher in the digital economy than in the past. Many argue that this threat strengthens competition among big firms as well as smaller firms who can unseat the giants (see herehere, and here).

However, it is not so clear that these arguments for bigger firms always hold. Less than one percent of startups end up as $1 billion companies and are often acquired or imitated by the giants along the way. In addition, industry lines are increasingly blurred as big firms leverage their user’s data to offer a broader range of goods and services, providing more valuable data on spending habits, and, ultimately, reinforcing the competitive advantage of big firms across industries.

A challenge for policymakers and regulators comes when assessing who indeed the biggest beneficiaries are. Diane Coyle of the University of Manchester points out that although the network effects of digital platforms produce real economic welfare gains, it is unclear how big those gains are or who captures them. Advertisers also place great value on free services and, as Luigi Zingales and Guy Rolnik of the University of Chicago notes, users do pay for these services in the form of very valuable information.

More economic tools are needed to quantify consumer benefits in such markets where traditional pricing does not provide the same kind of signals on market power as in other industries. Such assessments would better help policymakers and regulators ensure a level playing field and better distinguish between competitive and anti-competitive behaviors.

GROWING IMPORTANCE OF INTANGIBLE CAPITAL

A second feature of the digital economy that advantages larger firms is the growing importance of intangible capital.

Unlike tangible capital like buildings and equipment, intangible capital is not physical. It consists of ideas, branding, business processes, software, supplier relationships, licensing agreements, and other immaterial assets that generate value for a firm.

As digitization changes business models, firms are placing greater emphasis on intangibles. In the U.S., U.K., and some European economies, intangible investment already exceeds investment in tangibles.

As Jonathan Haskel and Stian Westlake describe in their book Capitalism Without Capital, there are four key economic properties of intangible assets that differentiate them from tangibles. Those properties are “scalability” (multiple people can use them simultaneously), “sunkenness” (the cost of producing them is mostly sunk), “spillovers” (easy for others to appropriate), and “synergies” (can be combined effectively).

With these properties, firms can achieve much larger scale, go to great lengths to prevent spillovers to competitors who can appropriate their sunk investments, and acquire other firms with intangible assets that offer synergies (like human capital or branding). Haskel and Westlake argue that these properties help explain the rise of superstar firms, more mergers and acquisitions, and higher market concentration in industries with a larger share of intangible investment.

In industries with greater intangible investment, small firms may have a harder time finding financing to invest and boost productivity. Small firms typically rely on bank lending that often require collateral from borrowers. But intangibles cannot offer physical collateral, are hard to measure, and, in the case of investments in knowledge and research and development, can easily be appropriated by others. These characteristics of intangibles make private equity financing more attractive for intangible-heavy firms, not only to undertake investments in assets where the cost is mostly sunk, but also to have an easier time protecting intellectual property when privately held.

In addition, private equity financing and venture capital for small firms can be difficult to scale up. These difficulties are partly due to the importance of social relationships and the large role of public subsidies in supporting a vibrant venture capital industry, which takes a long time to develop.

Large firms, on the other hand, can use their economies of scale (and buying power to acquire firms) to capture spillovers and exploit synergies. They also more easily attract capital.

LOOKING AHEAD

Are we headed into an economy dominated by big firms? Even techno-optimists, who believe that it is only a matter of time before the potential for today’s technological advances drive faster growth, are pessimistic on the implications for distribution. Concentrated markets may become the new normal. Policies would need to adjust to ensure level playing fields. In addition, better intellectual property protections, broad and inclusive financing ecosystems, new measurement standards, and greater investment in skills are examples of policies better suited for an intangible economy that is dynamic and inclusive. The possibilities are limitless, but the promise won’t realize itself.

source: www.brookings.edu

0 comments on “EU’s Taxation of the Digital Economy—Fair or Protectionist?”

EU’s Taxation of the Digital Economy—Fair or Protectionist?

taxationThe EU Commission has published two proposals on the taxation of the digital economy and digital business models. Will the reform of corporate tax rules and the second measure of an interim tax lead to a fairer taxation of digital activities in the EU? Since the economic crisis of 2008-09, we live in a different world. Countries started to prioritize “taxation” in their financial agenda for sound public funding sources. Both developed and developing countries have increased the direct tax base on business profit. In this environment, important initiatives were developed by the G-20, and G-20 countries started amending their local laws and regulations. A recent example relates to the taxation of the digital economy. The OECD and EU agree that the current international taxation rules are insufficient because digitalization enables businesses operating with no physical presence.

Even though the OECD and EU agree that the current international taxation rules are outdated, their way of addressing it is different. The OECD does not conclude any recommendation because there is no consensus among the members. On the other hand, the European Commission approach digital companies differently by taking a short-term (interim) and long-term stance. While the EC’s short-term stance is 3 percent digital service tax focused on taxing advertising, digital platforms and sale of data, the EC’s long-term stance is based on “significant digital presence” focused on a broad range of digital services, i.e. the provision of films, music, software, or cloud computing.

However, “taxing digital businesses” needs a global policy consensus to be successful and eliminate double taxation. Otherwise, pre-BEPS “double non-taxation phenomenon” would result in double taxation.

Why is the Work of Tax Administrations Challenging in a Digital Economy?

Business models have changed in the digital economy. The following companies are an example of new business models being used:

* Airbnb does not possess any real estates;

* Alibaba does not carry inventory;

* Booking.com does not possess any hotels; and

* Twitter and Facebook do not produce content.

Airbnb and Booking.com provide intermediary services and Twitter and Facebook offer advertising services and acquire their revenues from these activities.

They operate without a physical entity (i.e. building, factory) based on the business models. Taxation rules based on a nexus of a business applied prior to the digital economy makes taxation difficult in the new economy.

According to public opinion, these companies do not pay a fair tax, which is proportional to their earnings, in order to provide for the state expenses. Because of this, governments have to take action in order to provide justice in their tax systems.

About 75 percent of EU citizens expect the EU to struggle against tax evasion. In a public opinion poll, 75 percent of the participants believe that the current international taxation rules allow companies operating under digital business models to benefit from specific taxation regimes and pay lower taxes.

What Types of Works are being Carried out Concerning the Taxation of the Digital Economy?

An international standard and cooperation of the countries are required in order to tax companies. The most important organization with respect to this is the OECD and the OECD’s initiatives are supported by G-20.

OECD Functions

Digital economy models complicate the place and ratio of payment of the corporate tax accrued over income. This is because it is very challenging to determine the extent of an income acquired from a certain country, which should be referred to such country, without a nexus.

Consequently, Action 1 of the OECD’s Base Erosion and Profit Shift (“BEPS”) Action Plan published a temporary report addressing the tax challenges of the digital economy (“temporary report”). However, the OECD does not propose a taxation method in this interim report. It determines what the alternatives may be and makes evaluations.

Finally, in the meeting held in Buenos Aires on March 19-20, it was declared that the Ministers of Finance of G-20 will publish an updated Temporary Report on Tax Challenges Arising from Digitalization and will work towards a consensus-based solution by 2020. The implementations of the countries in the short-term are determined in the report. However, the actual purpose of the OECD is declared as formation of the grounds for progress toward a long-term multilateral solution in the next stage.

Accordingly, many countries express that digital companies acquire high income in their own markets in the digital economy and that they are required to pay corporate taxes over these incomes. Consequently they are taking actions in order to collect tax. For example, Turkey collects 18 percent VAT over the digital services offered to the individuals by the companies residing abroad, which was brought into force as of January 2018.

The reason for the countries to make legal arrangements is that they want to collect tax over such earnings without any delay, although they do not have any taxable assets in their countries according to the current international taxation frame.

However, the common opinion in the U.S. is that the taxation right on the income is taxable in the U.S. since all the value added and the intellectual property rights are created in the U.S. This is based on an old adjudication in the U.S. related to the economy (SALT Alert, 2018-01: U.S. Supreme Court Grants Certiorari in South Dakota Case Seeking to Overturn Quill-http://src.bna.com/x6V).

In the Quill Corp. v. North Dakota case in the U.S. which is related to the distant sales, there is the Supreme Court’s decision dated 1992, stating that North Dakota does not have any authority to collect sales tax in the products delivered to North Dakota where the company does not have a physical presence.

However, the subject of “economic presence (nexus)” is again on the agenda and has been since 2016 but nowadays, the subject of “physical presence (workplace)” is being discussed and should be re-evaluated. The states enacted laws to implement the principle of economic nexus in order to apply the sales taxes against the Quill decision. In 2016, South Dakota included its own economic nexus principle in the law. With the law, the sellers, without any physical presence shall be taxpayers in South Dakota for the sales tax based on an economic nexus principle. The threshold for the tax payment obligation is determined as at least “performing 200 separate sales or sales with a total of US$100,000.”

With respect to the case litigated concerning this issue, the Courts of First Instance of South Dakota decided that the Court is bound by the Quill decision and decreed in favor of the claimants. While reaching this decision, the thesis of the state that the principle of the physical presence of Quill “was out of fashion under the light of the developments in the software and technologies,” which was the reasoning of the state Supreme Court, was rejected.

It was decreed that it was based on the reasoning of the Quill case. However, on September 14, 2017, the Supreme Court of South Dakota upheld the decision allowing South Dakota’s opposition to the Supreme Court of USA. The opposition is expected to be submitted in Spring 2018. The decision is expected to have a significant influence on taxation and the economy.

EU Functions

About one week after the publication of the Temporary Report, the EU made a press release on March 21. According to the EU bulletin, the current “international corporate tax rules do not comply with the realities of the global economy” and do not comprehend the business models which may acquire profit from digital services in a country where one is not physically present. The current taxation rules were not successful in defining the new methods of the digital economy for creation of the profit, and specifically, the role played by the users in creation of value for the digital companies. In the current system, there is disconnection or noncompliance between the place where the value is created and the tax is paid.

The EU’s digital taxation package key areas are as follows:

* For taxation of the digital economy, it enables member states to collect taxes from the earnings acquired in their own regions, even if a company does not have a physical presence. The new rules shall provide online entities to contribute to the public finance at the same level with the companies which are connected to traditional physical workplaces.

* This proposal includes a recommendation to the member states for modifying the Avoidance of Double Taxation Treaties with the third countries. Accordingly, same rules shall be applicable both for the EU member and EU non-member companies. The Commission also recommended to provide assistance to the member states in the determination discussions with respect to the application at the international level for the digital corporate tax updates.

* It recommends a temporary digital services tax until the new rules are created for the taxation of digital services.

In compliance with the new rules recommended by the EU, the member countries shall be able to collect taxes from the earnings produced in their own regions, even if such companies do not have any “physical presence/connection” there. These rules constitute a proposal which is expected to be permanent.

Details are as follows: If a company possesses any of the following criteria, then it shall be accepted to possess a “significant economic digital presence” in a Member State:

* Exceeding the threshold of an income of 7 million euros from the digital services in an accounting year, in a member state (for example, acquiring income from advertisement placement based on the user data);

* Having more than 100,000 user access to the digital services in a member state in an accounting year (for example, sharing economy and acquiring income from the services that provide access to the users on online markets); and

* Conclusion of more than 3000 business contracts between the company and the work users for the digital services in an accounting year (for example, acquiring income from providing broadcast stream to the subscribers).

With this reform recommendation of EU, a solution is provided for two of the main challenges encountered by the Member States when taxation of the digital activities is discussed:

* Firstly, “physical presence/connection” in a member state shall not be required any more in order to apply tax to the earnings of a company. A significant digital presence shall permit the member states to apply tax to the earnings acquired within the borders of its land.

* Secondly, the factors such as user data shall be taken into consideration in distribution of the earnings since these become more important gradually in formation of the company data and play a significant role.

The other proposal of the EU which is identified to be temporary is the new digital services tax (“DST”); and it shall take effect as of January 1, 2020 and shall be applied at a fixed rate of 3 percent over the gross income:

* The DST shall be applied to specific digital services including providing an advertisement area, presentation of market areas facilitating the direct transactions between the users and transmission of the user data collected, while offering digital content or payment services.

* The entities achieving certain thresholds cumulatively shall be subject to DST. DST shall be applied to the entities with annual global income over 750 million euros and annual revenue over 50 million euros in the EU originating from digital services. If this economic presence belongs to a consolidated group, then the mentioned thresholds shall be assessed on the group level.

* DST shall be in the member states where the users are. If the users are in different member states, then the proposal will also enable the calculation of the tax base to be referred to the member states depending on specific distribution keys.

* The Directive also provides cooperation between the member states in a single-time mechanism and provides the tax payers to have a single contact point in order to fulfill all the administrative obligations concerning the new tax.

As explained above, both OECD and EU agree that the current international taxation rules are insufficient concerning the taxation of digital economy. Despite this, OECD members were not able to develop a new and concrete taxation rule with respect to this issue at the international level. As a short-term solution, OECD member countries adopt the method of taxation which is applied over the sales mostly. It is expressed that the long-term solution is targeted to be achieved in the year 2020.

The EU proposed draft directives concerning this issue. One of these is tied to having “a significant economic digital presence.” And the other is DST at the rate of 3 percent, which is planned to be collected over the gross income starting from January 1, 2020. However, the application of these depends on being adopted by the parliaments of 28 countries.

If a tax at the rate of 3 percent is applied within the direction of the proposal of the EU Commission, this means the probability of acquiring an income of about 5 billion Euros annually for the member states. When applied to the EU, this single rate tax will be able to provide help for avoiding “tax exchange” and “tax distortion” in a single market. The tax of 3 percent will be applied only as a temporary measure until the corporate tax rules supporting digital economy take effect.

Are the Proposals “Fair or Protectionist”? Would the Other Countries take Counter-Measures?

Are the double taxation with the temporary tax of 3 percent and the international rules contradictory? With regards to BEPS Action Plan 1, it is observed that the governments prefer the alternative of “Reverse Charge VAT,” “withholding” or “balancing tax” as the authority concerning the taxation method with respect to the “digital economy.” Because of this, the method proposed by the EU does not constitute any contrariety to the third countries or the World Trade Organization rules and any double taxation agreement. This is because the OECD or UN member countries are yet to develop a common understanding of digital economy taxation principles. However, the proposal of the EU is parallel to the principle of “subjecting the profit to taxation where the value is created,” which emerges more apparently following BEPS and which is the basic principle agreed. As a conclusion, it is expected to remain to be in force until “final, permanent tax rules” are applied for the digital economy. The countries carried out arrangements for “VAT,” “withholding” or “balancing tax” as the authority concerning the taxation of the digital economy.

It is estimated that about 120 to 150 companies are covered within the scope of the European Commission’s proposal of 3 percent temporary tax, which means the probability of acquiring an income of about 5 billion euros annually for the member states. According to the European Commission’s Commission Staff Working Document (http://src.bna.com/xPv ) dated March 21, 2018, there is no reliable data regarding (see the European Commission’s Commission Staff Working Document, pp. 67-68, http://src.bna.com/xPw) the annual turnover of digital economy companies. But some two-thirds of turnover data is available by applying a revenue threshold of 750 million euros.

On the other hand, it is an issue of concern how the U.S. will react to the EU Commission proposals. This is because it is expected that 50 percent of the d 120 to 150 companies shall be the companies residing in the U.S. Since the U.S. discussed its concerns during the G-20 leaders meeting convened in Buenos Aires on March 19-20, 2018, it may decide to take counter-measures if EU countries adopt these proposals. However, if the arrangements brought by the U.S. tax reform are taken into consideration, we believe that such proposals of the EU are arrangements which are the subject of lesser discussions.

In response to the proposals of the EC, Business at OECD (BIAC) shared its opinion through a Media release (see The Business and Industry Advisory Committee, Media release, http://src.bna.com/xPx), dated March 21, 2018. BIAC warns against fragmentation in international taxation and calls for a broad consensus on a reliable tax framework for all companies. Unilateral action targeting certain businesses and deviating from established principles will reduce the potential for economic growth and job creation, particularly where these measures are based on the taxation of gross revenue rather than on profits. Additionally, the Chair of the BIAC Committee on Taxation and Fiscal Affairs, Will Morris, said:

“Business at OECD believes that the OECD/G20 Inclusive Framework is the most appropriate forum in which to advance tax policy addressing digital taxation. We strongly encourage the EC to work with the OECD/G20 Inclusive Framework to help develop global consensus through a broad multilateral process that includes business and all stakeholders.”

One of the main questions is whether these proposals, which require consensus shall be adopted or not by all the EU member states. Some member states expressed their concerns about DST. These concerns are, for example, DST possessing the characteristic of being an income tax since it is collected from proceeds. In other words, this is a tax collected from proceeds, not from net income and this tax shall be required to be paid even if the company is in loss. Moreover, DST shall not be considered as a tax paid abroad and this tax paid in a foreign country cannot be set off from the corporate tax calculated. However, it is understood that the probability that DST may be deducted as an expense may reduce double taxation risk at one point at a certain scale.

Planning Points

In today’s world, existing principles of international taxation is based on the “material permanent establishment” definition (Article 5/1 of the OECD Model Tax Convention). Therefore, the term “permanent establishment” means “a fixed place of business” through which the business of an enterprise is wholly or partly carried on, which is based on “a place of business,” “fixed” and “through which the business of the enterprise is carried on.” Therefore, an internet website does not constitute “tangible property in itself” and “not a permanent establishment in itself.”

In the post-BEPS world we live in the OECD recognizes “a shift in value creation” due to the digital economy. But there is no roadmap on how this should be reflected in tax policy.

In this environment, companies should identify potential foreign tax obligations (i.e. VAT or equalization tax) in cross-border sales of services and intangibles. In order to evaluate their existing indirect tax and direct tax status, companies can look at their existing structure as follows:

* Detailed functional analysis can give a first reflection with a focus on key assets and core activities;

* Where users and customers are located may constitute PE because data becomes a key resource to create value;

* Identify where real economic activities performed;

* Identify where countries at which sales are realized;

* Find out the person who is liable to comply with foreign VAT laws;

* Determine the definition of digital services;

* Find out what type of customer you have (“B2B” or “B2C”); and

* Be aware of the threshold for registration.

Finally, if the proposal is enacted, it will enter into force on January 1, 2020. Therefore, digital companies should be looking at their existing business models now.

Also, “taxing digital businesses” needs a global policy consensus. Otherwise, pre-BEPS “double non-taxation” phenomenon would result in “double taxation.”

source: https://biglawbusiness.com

0 comments on “Dubai Holding to launch region’s first digital bank – it will invest up to Dh1 billion (230 mil Euro)”

Dubai Holding to launch region’s first digital bank – it will invest up to Dh1 billion (230 mil Euro)

dubai holdingDubai Holding, the global investment holding company, has announced it will invest up to AED 1 billion over the next five years to launch a next generation digital bank for the UAE, with plans to expand services across the Middle East and North Africa region. This announcement is in line with UAE’s goal of becoming a cashless digital economy, and guided by His Highness Sheikh Mohammed bin Rashid Al Maktoum’s vision for Smart Dubai.

Owing to the UAE having one of the highest smartphone penetration rates globally, Dubai Holding’s digital bank will aim to provide an on-demand, fully customizable and engaging experience to individuals and businesses alike.

His Excellency Abdulla Al Habbai, Chairman at Dubai Holding, said: “Through our investment in Dubai Holding Digital Bank, we are enabling digital opportunities with the potential to empower individuals and businesses to leverage new financial technologies for additional convenience and to unlock new business opportunities, in support of the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai’s for a smarter and cashless society.”

Leveraging Dubai Holding’s vast ecosystem of work, play, live offerings, the Digital Bank will offer unique perks and services to users, as well as providing bespoke banking services that extend beyond the traditional bank offering. Customers will have access to the region’s first truly personalized and dynamic loyalty program.

Dubai Holding’s Digital Bank aims to provide a state-of-the-art platform to facilitate digital transactions and accelerate the drive towards a cashless society, and facilitate the exchange of data and insights between individuals and businesses.

Apart from serving our individual consumers, this bank will be amongst the first pure play digital player in the UAE to serve the SME and mid-size corporate segment. We, at Dubai Holding, firmly believe that SMEs are the primary driver of the Dubai economy and their financial inclusiveness is a key to both Dubai and the UAE success.

Dubai Holding will leverage its exposure to and understanding of UAE SMEs to create a state-of-the-art loan and deposit offerings. We plan to address key SME pain points through transparent reporting across all SME accounts, cash management platform linked to receivables, payroll and payments.

The bank’s first products are expected to debut in 2019.

source: www.mediaoffice.ae