Existing international tax rules are increasingly failing to capture economic value generated in the digital age, threatening governments' ability to collect fair revenues and widening inequalities between developed and developing countries, according to global tax and public finance expert Dr. Lyla Latif.
Speaking at the opening of the in-person International Tax Justice Academy (ITJA) Intermediate Course for Civil Society Organization (CSO) actors and media practitioners in Nairobi, Dr. Latif warned that the rapid rise of artificial intelligence (AI), digital platforms, data-driven business models, and automated technologies is exposing deep weaknesses in the international tax architecture.
She argued that tax justice advocates, policymakers, civil society organizations, and journalists must begin rethinking taxation beyond traditional frameworks and confront the realities of an increasingly digitalized global economy.
"Obviously, anybody can speak about the importance of tax justice going forward," Dr. Latif told participants. "But what I want to speak about are three important things. And I think these three important things, in every trade that you go for, must form the substance of what you're going to be discussing when you think about tax justice as you move forward."
Keep up with the latest headlines on WhatsApp | LinkedIn
According to her, discussions on taxation can no longer be limited to conventional fiscal policies and revenue collection mechanisms. Instead, they must increasingly focus on how emerging technologies are transforming economic activity and challenging long-established tax principles.
"We're not just only referring to the political economy of taxation," she said. "But we're trying to think about the political economy of AI in taxation, of digitalization in taxation, of algorithmic bias in taxation, and of algorithmic bias in terms of gender bias as part of tax policy discussions."
Dr. Latif stressed that many existing international tax rules were developed for a world in which economic activity largely depended on physical presence and tangible assets. Today, however, value is increasingly created through digital platforms, data, algorithms, and artificial intelligence systems that can operate across borders without maintaining a physical footprint.
She cautioned that policymakers have yet to fully grapple with the implications of these developments.
"The conversations here are going to be really, really good," she said. "But learn the key characteristics of what the key topics are going to be, and ask yourself how this sits in the transformation stage we are at."
One of the most significant shortcomings in the current international tax system, she argued, is its continued focus on traditional digital commerce while overlooking emerging forms of AI-driven economic activity.
"Because all we are concerned about right now is Amazon and e-commerce and Netflix subscriptions," she said. "But how are we going to tax robots? How are we going to tax agents? Because the agents now, the AI agents, are the ones doing our work."
The expert questioned whether existing tax frameworks are capable of identifying and taxing the value generated by artificial intelligence systems, machine-learning algorithms, and automated digital services.
"So what do we mean by value creation in the digital economy?" she asked. "Data is value creation. Algorithms are value creation. User participation is value creation."
Her remarks highlighted growing concerns among tax justice advocates that current international tax rules fail to adequately recognize how wealth is generated in the digital economy, leaving significant portions of economic activity beyond the reach of taxation.
Dr. Latif also challenged participants to think critically about the foundations of the international financial system itself.
"So who designed the international financial architecture for us?" she asked. "We speak about the international financial architecture, but we are not talking about the international fiscal architecture. The fiscal architecture is the foundation."
She explained that while the international financial architecture consists of institutions, mechanisms, and systems that govern financial flows, the fiscal architecture is built upon the laws, norms, regulations, and principles that determine how taxing rights are allocated among countries.
"The financial structure is the building, the rooms, the gadgets in the house, the electricity, the windows," she said. "But what makes up the fiscal architecture? That's the law, regulations, norms, and principles."
According to Dr. Latif, many of these principles were established decades ago and have not evolved sufficiently to reflect the realities of digital business models and cross-border technology services.
Particular concern was raised over the concept of "permanent establishment," a cornerstone of international taxation that generally requires a company to have a physical presence in a country before it can be taxed there.
Dr. Latif argued that the concept is becoming increasingly obsolete in a world where businesses can provide services remotely through digital platforms.
"You could be sitting in Tunisia, sipping tea at the beach, and using a digital app to provide services in Kenya," she said. "But if we don't have a tax treaty, the concept of permanent establishment will bar them from paying taxes in our country."
She noted that such limitations create significant challenges for governments seeking to mobilize domestic resources and ensure that economic activities taking place within their jurisdictions contribute fairly to national development.
Addressing domestic resource mobilization (DRM), Dr. Latif said many governments continue to focus on traditional sources of revenue while overlooking emerging opportunities within the digital economy.
"We think about what the existing sources of revenue are and where the leakages are," she said. "But what about the innovative forms of financing we are still not tackling?"
She argued that governments need to pay greater attention to digital platforms, informal economic activity, and emerging technological systems that increasingly shape economic transactions and revenue generation.
"There is this conversation about visibility in tax and invisibility of tax," she said. "What is visible is your source income. But sometimes there are things that are not visible to the state, and that happens at the beneficiation stage."
Beyond taxation itself, Dr. Latif emphasized that language plays a powerful role in shaping tax policy outcomes and global governance structures.
"One of the things that is very crucial is language," she said. "Language is becoming a serious problem because it is invisibilizing the process of fair allocation of taxing rights."
She argued that many concepts commonly used in international tax law originated in colonial legal systems and continue to shape contemporary policy debates.
"When we speak about permanent establishments, who created that term for us?" she asked. "The language of the law carries a colonial imprint, and that is something we must decolonize."
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Dr. Latif further highlighted growing concerns about the valuation of data and its implications for global inequality.
"Data today is valued at a trillion US dollars," she said. "If you are an African, your data collected annually is worth $263, but if you are a single male doctor in the United States, your data is worth $5,000."
She questioned how such valuations are determined and whether existing algorithmic systems reinforce structural inequalities between developed and developing countries.
The expert suggested that future tax policy debates must increasingly address issues of digital ownership, data governance, and equitable distribution of value generated by emerging technologies.
She also challenged participants to consider whether international institutions created in the aftermath of World War II remain fit for purpose in addressing today's economic realities.
"Are we talking about reforming the international financial architecture?" she asked. "Or do we need to dismantle it and come up with something new?"
Referencing global governance institutions such as the International Monetary Fund (IMF), World Bank, and World Trade Organization (WTO), Dr. Latif argued that meaningful tax justice requires a deeper examination of who shapes global tax rules and whose interests those rules ultimately serve.
Concluding her remarks, she urged civil society organizations and journalists to play a more active role in scrutinizing international tax governance and advocating for more equitable systems.
"At the end of the day, tax justice is all about who holds the pen," she said. "Is it us holding the pen, or is somebody else holding the pen?"
