Taxing Cross-Border Services

Shafik Hebous, Brendan Crowley, Rasmi Das, Tibor Hanappi, Cory Hillier, Adam Jakubik, Eric Robert and Christophe Waerzeggers

No 12845, CESifo Working Paper Series from CESifo

Abstract: Faced with the limitations of existing tax frameworks for cross-border trade in services — particularly the lack of taxing rights over certain income from highly digital business models and the continuing scope for profit shifting through payments for cross-border services — countries and scholars have adopted or proposed a wide range of tax measures. This paper brings these measures together in a coherent framework and examines them from both an economic and a legal perspective. It documents how cross-border services trade has grown, become more digital in composition, and become increasingly concentrated across sectors, firms, and jurisdictions. It then develops a comparative synthesis covering destination-based consumption taxes such as VAT, gross-revenue taxes — notably digital services taxes — as well as income-based instruments such as nexus and withholding rules, and anti-avoidance rules aimed at limiting profit shifting through deductible cross-border payments. The paper argues that the economic incidence of each instrument is central to policy assessment and that evaluating these instruments in isolation obscures their interaction. Its main conclusion is that broader reliance on destination-based taxation can address many of the core problems raised by digitalized services trade more effectively than narrower, more distortionary alternatives.

Keywords: Digital Service Taxes (DST); tax policy; trade policy; digital economy; services trade (search for similar items in EconPapers)
JEL-codes: F13 H22 H25 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/cesifo1_wp12845.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12845

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().