The 2025 Sevilla Conference is a great opportunity to align international tax systems with a more inclusive digital future. Now is the time to act.
Irma Mosquera and Tofigh Hasen Nezhad Nisi
Since 2002, the United Nations’ Financing for Development (FfD) Conferences have served as pivotal moments for shaping the international development finance agenda. The three previous conferences, Monterrey (2002), Doha (2008), and Addis Ababa (2015), have each addressed urgent global economic challenges, from mobilizing international aid and trade, to tackling sovereign debt and strengthening domestic resource mobilization. In each of these moments, the conferences have reflected the priorities of their time.
Now, the forthcoming 2025 FfD Conference in Sevilla arrives in the context of one of the most transformative shifts of our time: the rise of the digital economy. Digital technologies are redefining commerce, finance, labor markets, education, and governance. But while they offer opportunities, they also expose structural inequalities, particularly for developing countries. Among these the digital divide, the gap in access to digital infrastructure, skills, and services between developed and developing countries, remains a pressing and under-addressed barrier to inclusive development.
One area where this tension is visible is international tax policy. As digital business models increasingly generate value across borders, without requiring a physical presence, countries, especially in the Global South, face new challenges in capturing a fair share of revenue. In response, several multilateral initiatives have emerged: from the OECD/G20’s BEPS Inclusive Framework, including Pillar One, to the United Nations’ Article 12B and the ongoing negotiations toward a UN Framework Convention on International Tax Cooperation.
However, despite their importance, these efforts remain primarily focused on revenue reallocation and technical coordination, while seemingly overlooking the broader question: How can international tax reform be a lever for digital development in low-income countries? Unfortunately, current policy frameworks do not address this issue. Tax is often discussed in relation to digital development and ensuring revenue collection, without recognizing that taxation can serve as a tool for closing the digital divide. This gap is evident in the Final Report of the International Commission of Experts on Development Finance, published in February 2025 to inform the Sevilla Conference. As the report acknowledges important areas such as the use of digital tools in tax administration (p. 8), digital services taxation (p. 7), and broader innovation ecosystems (p. 23), it falls short of making a clear and direct connection between international taxation and influencing results of digital development.
The Draft Outcome Document for the 2025 Conference similarly does not address this opportunity. The only meaningful reference appears in paragraph 22(d), which encourages efforts regarding the tax base, informal sector, and digital public infrastructure:
“We encourage the broadening of the tax base and continuing efforts to integrate the informal sector into the formal economy in line with country circumstances, including by harnessing technology and innovation, investing in digital public infrastructure, by reducing the cost of compliance and through providing appropriate incentive”
This reference is valuable but remains too general. It does not invite to explore whether and how tax reforms enable, or hinder, the digital growth of developing countries, especially those still lacking in foundational infrastructure and digital skills.
We believe this is a missed opportunity. Since the Addis Ababa Conference in 2015, the digital landscape has changed dramatically. If international tax cooperation continues to evolve, without aligning itself with digital inclusion and development objectives, we risk entrenching existing inequalities and creating frameworks that work for some, but leave others behind.
This blogpost explores how the current debate on the taxation of the digital economy intersects with digital development needs in low-income countries. It demonstrates the challenges faced by developing countries, discusses the limitations of ongoing tax reform efforts, and puts forward a proposal to ensure that tax policy plays an active role in reducing the digital divide.
Imbalanced Digital Growth
Over the past decade, the pace of digital transformation has accelerated, yet not equally. While developed countries have expanded their digital infrastructure, adopted advanced technologies, and grown platform economies, many developing regions continue to face fragmented digital progress. This disparity is not solely a matter of the will to adopt technologies, but reflects structural difficulties in access, capacity, and investment. Developing nations show to be increasingly interested in adopting advanced technologies, however their capacity to realize such leapfrogging ambitions makes this difficult. [1]
In high-income countries, internet access rates exceed 90%,[2] and citizens benefit from reliable broadband, smart city infrastructure, and access to digital tools in education, healthcare, and finance. By contrast, in many low- and middle-income countries, internet connectivity remains unreliable, unaffordable, or altogether absent. This is particularly observed in rural or marginalized communities.
The result is a widening gap in the ability to participate in and benefit from the digital economy. Platform-based services such as e-commerce and content sharing, are growing in some countries, while others lack the basic infrastructure to host or regulate these markets. The same pattern exists in education: where some countries are integrating online learning, others still struggle to ensure digital literacy. This uneven digital growth has long-term implications. Countries that are digitally excluded risk falling further behind in economic competitiveness, public sector innovation, and access to global markets.[3]
Understanding the Digital Divide
The digital divide refers to the growing inequality in access to digital infrastructure, skills, and opportunities, both between countries and within them. It is not just about ownership over a device or internet access, but more so about meaningful participation in a digital society. This divide leads to a situation in which access to information or participating in online education, is greatly dependent on the state in which one resides.
At the international level, the gap between high-income and low-income countries is evident. This creates separate debates taking place on two ends of the digital development spectrum, where one party can afford to implement policies that harness cutting edge technologies to further their economic growth, the other party is still looking to build basic digital infrastructure for their public administration. That is exactly why the former party may benefit from the same policies that could end up hurting the latter, thus expanding the space between them.
This divide is not a uniquely global phenomenon. Within the same borders, significant differences can exist between urban and rural areas, men and women, and across income groups. In many developing regions internet access could be scarce in cities, but non-existent in rural communities. Additionally women and marginalized groups also seem to be disproportionately excluded due to limited literacy or affordability barriers.
These inequalities in digital access reinforce existing development gaps. In education, students without connectivity or digital devices are cut off from learning and acquiring digital skills. This in turn translates to issues in employment, as digital exclusion limits access to job markets in which digital skills play an increasingly vital role. This inability to access digital financial services, whether due to limited digital literacy or connectivity, also keeps people outside the formal economy, leading to many blind spots for governments trying to construct an effective public administration.[4]
With this in mind, the digital divide can be seen as a widening canyon, becoming increasingly difficult to bridge as it expands. Taking action at the appropriate time is therefore essential, in order to prevent a never-ending game of catch-up for developing nations.
Building vs. Taxing the Digital Economy
If building a digital economy is difficult, taxing it shows to be at least as challenging.[5] The digitalizing economy has complicated the foundations of international taxation, which were designed for a world of physical goods and borders. However, as the physical and virtual world are becoming more and more intertwined, these foundations are all but sustainable. For developing countries, the challenge then becomes twofold: to build inclusive digital economies in the first place, while also finding effective ways to tax them.
One of the barriers for developing countries is the tax-levying infrastructure. Many low- and middle-income countries struggle with basic digital connectivity, let alone the sophisticated systems required to monitor and tax digital transactions. Without reliable internet connection and electricity, tax administrations cannot digitize their operations or reach taxpayers effectively. The OECD, on multiple levels, has emphasized the need to digitize tax administrations in order to effectively tax business in the digital economy. The OECD Tax Administration 3.0 report is prime example of this.[6] An outdated tax administration will not be able to handle enforcement complications in the digital economy, such as limited traceability of transactions. As these transactions often take place through global platforms, little to no traces of data are accessible to local tax authorities, especially when hosted on foreign servers or processed via encrypted payment systems. This makes it nearly impossible for under-equipped tax administrations, lacking in tools and skills to audit or even identify digital activities within their jurisdictions. The result is a widening gap, between where value is created and where it is taxed. Without taking this into account, low-capacity states risk being excluded from the revenue benefits of participating in the modern economy.
A second challenge lies in effective legal frameworks. Most tax laws remain rooted in the concept of physical presence, which focuses on a “permanent establishment” in the source country in order to secure taxing rights. This makes it difficult to capture revenue from digital businesses that operate across borders, but entirely online. Adapting these laws requires time, political coordination, and expertise that many developing countries do not have. However, regardless of this lack of capacity, negotiations on this area of international taxation are underway. These fundamental changes will play a central role in international fora aimed at constructing modern tax policies for the digital economy, as we will highlight further on. States lacking the tax expertise to identify possible risks to the development of their digital economy, might end up in a position that is more detrimental to their growth than prior to the negotiations.
Big Tech and Global Tax Reform Efforts: OECD and UN
Defining examples of digital business are those of major technology companies, such as Google, Alibaba, Amazon, Netflix, Uber, and others. They can operate extensively within a country, without ever setting up a physical shop or factory. These companies reach consumers through platforms, stream services, process payments, and collect user data, all from servers and offices located elsewhere. In doing so, they generate substantial revenue in countries where they are not technically “present.”
This model poses a challenge to traditional tax frameworks. Under most international tax treaties, a country only has the right to tax a foreign business’s profits if that business maintains a permanent establishment, meaning a physical branch, office, or factory, within its borders.[7] There must be at least be some kind of physical substance in a source state to which the taxing rights of states can be attached, leading to the taxation of the income derived from that source. Since digital companies can operate entirely remote, there is no physical substance to which to attach a taxing right. Therefore, they remain largely untaxable under these outdated rules, despite producing significant value from the local economy. Consequently, this growing tax gap puts additional pressure on states to shift tax policies towards other types of income or reduce government spending, while their infrastructure and local economy is profited from. States provide the market, users, and the data that creates value, but receive little to no share of the tax revenues generated by that activity. Essentially, the profits are free to flow out of the country, completely untouched by any domestic tax.
Recognizing that traditional tax rules are no longer fit for the digital age, two multilateral efforts have been focusing on modernizing the allocation of taxing rights: one led by the OECD, the other by the United Nations.
The OECD’s efforts began with BEPS Action 1, which identified the challenges of taxing the digital economy. This initiative laid the groundwork for Pillar One, a proposal that seeks to reassign a portion of multinational profits to the countries where consumers and users are located, the so-called “market jurisdictions.” More than 130 countries have politically endorsed this framework under the BEPS Inclusive Framework.[8] Of these 130 countries, many are developing countries. These states have a say in the construction of the future international taxing climate.
In parallel, the United Nations has pursued a more source-country-oriented approach. Through the introduction of Article 12B in the UN Model Tax Convention, the UN proposes that countries should have the right to tax automated digital services, even in the absence of a permanent establishment. Negotiations are currently underway to establish a broader UN Framework Convention on International Tax Cooperation, with developing countries seeking broader representation and a more development-focused agenda.[9]
Both of these initiatives challenge outdated assumptions with regard to the global economy, and acknowledge digital value creation across borders. They seek a more effective and fair tax system, with the inclusion of developing countries not just at the implementation level, but also at the negotiating table. However, the primary focus of the previously mentioned initiatives remains on the technical allocation of taxing rights, not on whether these rules actively support digital development. Additionally, they seem to ignore in what manner these updated global tax policies can enhance the digital development, specifically in low-income countries, in order to limit the expansion of the digital divide.
This gap can also be observed in the 2025 Draft Outcome Document for the Financing for Development Conference.[10] The draft includes important commitments to digital infrastructure and public goods, but it fails to link these to the design and deployment of international tax rules. Similarly, the Final Report of the International Commission of Experts on Development Finance (February 2025) addresses tax cooperation and administrative capacity, but avoids the question of whether tax policy itself can be a tool for digital inclusion.[11]
Without integration of a perspective on the digital divide, global tax reforms risk reinforcing the very inequalities they aim to resolve. If development goals are not explicitly built into tax cooperation frameworks, there is no guarantee that they will follow. They may even be left further behind.
Policy Proposal: A New Paragraph in the 2025 Outcome Document
If the goal is to build a more inclusive digital economy, then tax reform must be seen not only as a question of revenue allocation, but as a lever for digital development. That means recognizing and actively supporting the enablers of digital development, especially in low- and middle-income countries. Without them, revenue focused tax reforms, will struggle to generate sustainable growth or reduce inequality. Unfortunately, the digital development factors discussed in this piece are not clearly articulated in current multilateral tax proposals, creating a significant risk of policy incoherence.
The 2025 Draft Outcome Document could gain relevance by addressing the question of how taxation can serve as a lever for inclusive digital development. Thus, the authors recommend the inclusion of the following paragraph in the final Outcome Document of the 2025 Financing for Development conference in Sevilla:
“We aim to position international taxation as a strategic tool for advancing digital development in low- and middle-income countries. This means promoting cross-sector coordination between tax, trade, investment, and technology actors to ensure coherent policymaking. It would direct digital tax revenues toward critical areas such as infrastructure, digital literacy, and access to essential online services, with a strong emphasis on inclusion. This process will require regular impact assessments of tax policies on digital equity, particularly for marginalized groups like women, youth, and informal workers. To achieve the goal of inclusive digital development, a mechanism to monitor progress and share best practices among member states will be constructed.”
This proposal will bring us closer to the Sustainable Development Goals, responds to the realities faced by developing nations, and builds on existing global tax reform efforts. Most importantly, it takes into account that the digital future should not just be more connected, but also more equitable, inclusive, and just. The Sevilla Conference has an opportunity to embed this vision into the global financing agenda and it should not be missed.
Conclusion
This blogpost has made the case for a concrete addition to the 2025 Financing for Development Outcome Document: a new paragraph that links international tax policy to inclusive digital development goals. The objective is to ensure that digital taxation does not operate in isolation of digital development, but actively supports inclusive digital transformation in developing countries and minimizes the global digital divide.
Current reform efforts, including the OECD’s Pillar One and the UN’s Framework Convention negotiations, are primarily focused on reassigning taxing rights in the digital economy. These efforts aim to improve fairness in global taxation, but they remain detached from the question of whether the resulting frameworks contribute or obstructs development outcomes. This gap is particularly evident in the limited references to digital taxation in both the Draft 2025 Outcome Document and the Final Report of the International Commission of Experts. Without an intentional link to development strategies, these reforms risk being inaccessible to the countries they are meant to benefit.
Developing countries cannot implement or meaningfully benefit from global tax rules if they lack the digital infrastructure, administrative capacity, and digital literacy to do so. Taxation cannot only be about increasing collection or enforcing compliance when aiming to be inclusive, it should be integrated into broader efforts to consider and build digital capabilities and close the digital divide.
The proposed paragraph would recognize taxation as a lever for digital inclusion, promote coordination between tax, tech, trade, and investment sectors, and commit to using digital tax revenues to support access, infrastructure, and equity. It also calls for impact assessments and the creation of a monitoring mechanism under UN/ECOSOC to ensure follow-through.
The 2025 FfD Conference offers a chance to shift course. The tools exist and the frameworks are under negotiation. What is needed now is the political will to ensure that tax reform works for development, not only to redistribute wealth, but for long-term inclusive digital growth.
This blogpost is based on the contribution presented at the Reorienting International Economic Law for the Digital Economy: From Addressing the Digital Divide to Enabling Digital Development? Organized by the College of Law Hamad Bin Khalifa University (HBKU) and the Geneva Graduate Institute, January 2025.
[1] Goldemberg, J. (2011). Technological Leapfrogging in the Developing World. Georgetown Journal of International Affairs, 12(1), 135–141. https://www.jstor.org/stable/43133708
[2] Global Internet use continues to rise but disparities remain | Division for Inclusive Social Development (DISD)
[3] Widening Digital Gap between Developed, Developing States Threatening to Exclude World’s Poorest from Next Industrial Revolution, Speakers Tell Second Committee | Meetings Coverage and Press Releases
[4] United Nations Conference on Trade and Development. (2023). Progress made in the implementation of and follow-up to the outcomes of the World Summit on the Information Society at the regional and international levels: Report of the Secretary-General (A/78/62–E/2023/49).
[5] OECD (2014), Addressing the Tax Challenges of the Digital Economy, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing. http://dx.doi.org/10.1787/9789264218789-en
[6] OECD. (2020). Tax administration 3.0: The digital transformation of tax administration. OECD Publishing.
[7] Kobetsky, M. (2011). International taxation of permanent establishments: Principles and policy. Cambridge University Press, pp. 106-123.
[8]OECD (2020), Statement by the OECD/G20 Inclusive Framework on BEPS on the Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalisation of the Economy – January 2020, OECD/G20 Inclusive Framework on BEPS, OECD, Paris.
[9] United Nations. (2021, September 27). Article 12B of the UN Model Tax Convention, as agreed by the Committee at its 22nd Session (subject to final editing). United Nations Committee of Experts on International Cooperation in Tax Matters.
[10] United Nations. (2025, March 10). First draft: Outcome document of the Fourth International Conference on Financing for Development – Seville, Spain, 30 June to 3 July 2025.
[11] As stated in the report, “The Financing for Development process has always sought to engage a wide range of stakeholders. In addition to Member States of the United Nations, these have always included the so-called major institutional actors (IMF, UNCTAD, UNDP, World Bank, and WTO), as well as civil society and the business sector.” In addition, “a technical report [was] prepared by a pluralist group of experts, created on an ad hoc basis to identify the most relevant issues, facilitate the search for new approaches and instruments, and suggest impactful and technically sound proposals. In this context, an International Commission of Experts was established to prepare a report aimed at offering valuable insights and recommendations to enrich the process.” The Commission is chaired by José Antonio Ocampo, with other experts including José Antonio Alonso, Ishac Diwan, Barry Eichengreen, Daniela Gabor, Jayati Ghosh, Stephany Griffith-Jones, Carlos Lopes, Léonce Ndikumana, Annalisa Prizzon, Joseph Stiglitz, Fiona Tregenna, Dzodzi Tsikata, and Jiajun Xu, see, International Commission of Experts on Financing for Development. (2025, February). Financing a sustainable future: Proposals for a renewed global development finance agenda (Final report), p. 2.