In this article, the author argues that, since economic activity is no longer preconditioned on physical presence, the existing international tax rules are insufficient. Using evidence of base erosion and profit shifting by digitalized businesses, the article discusses the adequacy and utility of alternative measures for taxing profits arising from digitalized operations – including withholding tax, an equalization levy and the test for significant economic presence – and the consequences for source countries. The author finds that the test for significant economic presence may be a useful measure; however, its wider acceptance hinges on international consensus.