The Taxman calls. How does Facebook answer? Global Effects of Taxation on Online Advertising

Angel Cuevas (), Ruben Cuevas (), Andrea Lassmann, Federica Liberini and Antonio Russo
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Angel Cuevas: Universidad Carlos III Madrid
Ruben Cuevas: Universidad Carlos III Madrid

No 17-09, Working Papers from NET Institute

Abstract: We study the effects of the taxation of digital platforms on the online advertising market. We exploit novel data on daily unit prices of Facebook ads targeted to country-specific audiences, collected around a major change in the firm's accounting practices following the introduction of the UK Diverted Profit Tax. We show that a substantial increase in ads prices followed such change, although with heterogeneous intensity across countries. These results are in line with a model of a platform operating in the global advertising market. We show that taxation of profits generated in one country makes the price charged to advertisers from that country (resp. other countries) increase (decrease). Accordingly, we demonstrate that aggregate advertising prices in OECD countries increased more, after the policy change, the larger is the market share of UK-based advertisers.

Keywords: tax incidence; digital economy; online advertising (search for similar items in EconPapers)
JEL-codes: F16 H22 H25 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017-09
New Economics Papers: this item is included in nep-acc, nep-cta, nep-mkt, 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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