handbook-tb

Jinyan Licreating an export volume of RMB 1.3 trillion, 20 per cent of totalexports of SMEs in China. 503.3 Key features of the digital economyThe digital economy challenges the tax base of market jurisdictionsbecause it has features that render the existing tax rules inapplicable.In a digital economy, knowledge and information (data) is considereda main production factor, in addition to the three major productionfactors of an industrial, capitalist society — labour, capital and land.Digitization 51 of core economic activities, such as production, distributionand consumption of goods and services, turns tangibles intointangibles, physical things into digital bits and bytes.The digital economy has given rise to a number of innovativebusiness models, products and services, such as e-commerce, onlineapp stores, online advertising, cloud computing, payment services, highfrequency trading and participative networked platforms. Participantsof the digital economy include Internet giants such as Facebook andGoogle as well as, more importantly, traditional businesses whoseactivities are linked and enhanced through the use of ICT by offeringonline platforms to facilitate traditional business activities, such asonline sales, online payments, online auctions, online logistical solutions,online publication, online broadcasting, and so on. The lion’sshare of the digital economy occurs between businesses.There is a variety of revenue models in the digital economy,including: (a) advertising-based model, under which the company offerscontent, services and/or products and provides a forum for advertisementsand receives fees from advertisers (for example, Facebook andGoogle); (b) subscription model, under which the website that offersusers content or services charges a subscription fee for access to someor all of its offerings (for example, Consumer Reports Online, The50See Economic Daily, “Tax Rebate and Exemption Help Cross-BorderE-Commerce Upgrade,” (2014), available at http://www.chinatax.gov.cn/2013/n2925/n2953/c673757/content.html.51Digitization — the mass adoption of connected digital services by consumers,enterprises and governments — is regarded as a fundamental driverof economic growth in developed and emerging markets.422