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Jinyan Liprominently in developing countries than in developed countriesin terms of its share of the total tax revenues. 10 The VAT generatesthe largest share of tax revenue in many developing countries. 11 Asa result, any erosion of the tax base of the CIT and/or the VAT couldhave profound consequences on the revenue capacity of developingcountries. Furthermore, the loss of tax revenue is presumably moreurgent and real in developing countries as they are net importers ofdigital goods and services.To combat this global phenomenon of digitization, a “global”reaction to the tax challenges of the digital economy has occurred. TheOECD Project on BEPS, the work of the United Nations Committee ofExperts on International Cooperation in Tax Matters (United NationsCommittee of Experts) on BEPS and the participation of the internationalbusiness community and the tax community are testamentsto such movement. This movement presents a unique opportunityfor developing countries to participate in the “globalization of taxpolicy” — developing international tax rules that can take into accounttheir interests as source or market jurisdictions. Interestingly, the technologicaladvances that enable the growth of the digital economy mayfurther help developing countries improve overall efficiency in theirtax administration and transform them into more modern tax systems.The present chapter aims at exploring the options availablefor developing countries to protect their tax base in the face of thegrowing digital economy. 12 It draws on work of the OECD, a reportby a European Commission Expert Group on Taxation of the Digital10IMF, Spillovers in International Corporate Taxation, supra note 4, at 7.11Richard M. Bird and Pierre-Pascal Gendron, VAT in Developing andTransitional Countries (Cambridge University Press, 2007).12Because the digital economy issue cuts across all sectors of the economyand all forms of BEPS, the scope of the present chapter can potentially bevery broad and overlap with that of other chapters in this publication, particularlyChapter II, Taxation of income from services, by Brian Arnold, andChapter VII, Preventing avoidance of permanent establishment status, byAdolfo Martín Jiménez. To the extent possible, the present chapter will deferto these other chapters on general issues and principles and focus on digitalservices and unique permanent establishment (PE) issues arising from thedigital economy.410