From Income to Consumption

As a result of digitization and globalization, worldwide business relationships are now possible without a direct physical presence as a company in individual markets. As early as 2015, the OECD identified the fact that digitally operating businesses can provide their services without the need for a physical presence in a market as the greatest challenge to the fair distribution of tax revenue worldwide. Because they are not tied to a particular location, companies can choose their tax domicile and tax their profits where the tax system is designed to be particularly advantageous from the company`s perspective. In view of the traditional link to the physical presence of the taxpayer, the link to income is not very suitable for digitalization. New connecting points are therefore needed to guarantee a fair distribution of tax revenue between the individual states. One potential connecting point would be consumption, because consumption is simply less mobile than capital. In addition, the triumph of the Western-style consumer society must not be disregarded. Every tax levy in every conceivable form means a piece of self-reflection on the part of society. Work as a cultural instance and as a medium for the construction of individuality is receding into the background in essential society compared to the 20th century. In our society, people increasingly define themselves on the basis of the goods they consume. Especially against the background of the culturally conditioned relativization of the factor work and the paradigm shift towards consumption, the question arises in tax law how it should react to the changes in our social behavior. A creeping consumer orientation of tax systems seems to be the result. Tax systems around the world are in fact becoming more and more oriented toward consumption and consumable income; this is also the case in Austria. The Austrian tax system is basically designed as a mixed system. Direct taxes are primarily income-oriented and indirect taxes are primarily consumption-oriented. The trend toward increased consumption orientation is now based on two developments: First, the shift of tax burdens from direct income taxes to indirect consumption taxes and, second, increased elements of consumption orientation in income or corporate taxes. Based on these developments, a paradigm shift from capital- to consumption-oriented taxation can be assumed. It is now the task of science to identify and analyze this paradigm shift and to put it into a legal framework. The objective research project will undertake a comprehensive analysis of these developments, which has been lacking so far. 1