miércoles, 8 de julio de 2015

The debate of sustainability of local government services

Taxes in the digital era looks as one of those never ending debates. The disruption of the legacy business models are putting on the table the inadequacy of the tax structure at all the government levels. When it looks that the OECD is near of finishing its works on BEPS that aim to find a new tax model for corporate taxes and VAT, when the EU starts an early implementation of this new approach, the taxing model begins to stretch towards the rupture in the local level. 

Although not studied as well as the case of VAT or corporate taxes, the local taxes in its current structure will be one of the main losers of the digital era. Retail premises are disappearing, taxi licenses are endangered by the carpooling transport models and city taxes linked to hotels are also blurring due to lodging sharing services. From this perspective, the sustainability of the services at the local level depends in tapping new sources of taxes. Therefore, we should not be shocked by the appearance of the "cloud tax" in Chicago or the "airbnb tax" in Paris. Despite the critics it is a logical first step, the alternative could be not providing services that are essential for the welfare of the city. Nevertheless, there is a difference between the two cases. The "cloud tax" model implies that the consumer pays for the taxes that businesses no longer pay. Therefore, we face again a replacement of business responsibility with the sustainability of the society with an increase of the weight of this responsibility for the citizens.

However, I doubt that the future of local services will be in this kind of taxes, or at least not only. The sustainability of the cities is in the smart city model. The digital transformation of the city ensures a decrease in the cost of the service and at the same time allow to tap new sources of incomes for the local council. Only through, the transposition of the legacy taxes to the digital world it would be difficult to fuel the need of budget of the local governments.

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