The Economics of the Digital Services Tax

Wolfram Richter

No 7863, CESifo Working Paper Series from CESifo

Abstract: The use of digital services is largely non-rival. This paper argues that vanishing marginal costs of supply change policy incentives. Small countries are incentivized to tax the import of digital services. In fact, various countries have already moved towards expanded source taxation of online business activities. If such practice spreads, the quality of digital services will be negatively affected. This paper argues that countries exporting digital services have reason to respond by promoting an international tax regime in which the profit earned on remote supplies of digital business services is split between the countries involved.

Keywords: digital services; remote supply; import tax; alleviating double taxation; profit splitting (search for similar items in EconPapers)
JEL-codes: H25 M48 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-acc, nep-ore, nep-pay, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7863

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