The Digital Economy: New Business Models and Key Features

Abstract

New business models in digital economy, discusses the spread of information and communication technology (ICT) across the economy, provides examples of business models that have emerged as a consequence of the advances in ICT, and provides an overview of the key features of the digital economy that are illustrated by those business models. All sectors of the economy have adopted ICT to enhance productivity, enlarge market reach, and reduce operational costs. This adoption of ICT is illustrated by the spread of broadband connectivity in businesses, which in almost all countries of the Organisation for Economic Co-operation and Development (OECD) is universal for large enterprises and reaches 90% or more even in smaller businesses. As digital technology is adopted across the economy, segmenting the digital economy is increasingly difficult. In other words, because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy. Attempting to isolate the digital economy as a separate sector would inevitably require arbitrary lines to be drawn between what is digital and what is not. As a result, the tax challenges and base erosion and profit shifting (BEPS) concerns raised by the digital economy are better identified and addressed by analysing existing structures adopted by MNEs together with new business models and by focusing on the key features of the digital economy and determining which of those features raise or exacerbate tax challenges or BEPS concerns, and developing approaches to address those challenges or concerns.