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Jinyan Lion Income and on Capital 17 (OECD Model Convention). Examples arethe lower threshold for physical presence or permanent establishment(PE) and withholding taxes on royalties. Extending the policy rationaleof these broader source taxation rules to the context of the digitaleconomy seems to be both consistent with the wider policy rationale ofpreventing BEPS and the right direction for formulating tax measuresfor the digital age. As for the VAT, there are already some precedentsfor developing countries to consider, such as requiring foreign onlinevendors to register for VAT if the sales in a country exceed a specifiedthreshold.Third, while recognizing the merits of the evolutionary approach,the global and intangible nature of the digital economy does call forsome original thinking about where value is created for tax purposesand how States can share the new tax base fairly. New nexus rules ornew ways of implementing existing principles, such as the arm’s lengthprinciple, are necessary to ensure a fair sharing of the tax base amongcountries, especially between developed and developing countries.Fourth, it is in the best interest of developing countries to participatein multilateral efforts to tackle the tax challenges of the digitaleconomy. Economies of developing countries are increasingly tied tothe global economy, as is their tax base. The global nature of the neweconomy defies any unilateral locally based or nation-centric tax policiesor enforcement measures.2. Tax base of developing countries2.1 Corporate income taxThe tax base of the corporate income tax (CIT) is the net profit earnedby corporations from various activities, such as trading, manufacturingand processing, retail, extractive and services. The tax rate is generallyflat. Corporations are required to file tax returns and self-assesstheir tax liability.17OECD, Model Tax Convention on Income and on Capital (Paris:OECD, 2014).412