The Internet as a Tax Haven?

David Agrawal

American Economic Journal: Economic Policy, 2021, vol. 13, issue 4, 1-35

Abstract: If online transactions are tax free, increased online shopping may lower tax rates as jurisdictions seek to reduce tax avoidance; but, if online firms remit taxes, online sales may put upward pressure on tax rates because internet sales help enforce destination-based taxes. I find that higher internet penetration generally results in lower municipal tax rates but raises tax rates in some jurisdictions. The latter effect emerges in states where many online vendors remit taxes. A 1 standard deviation increase in internet penetration lowers local sales taxes in large municipalities by 0.15 percentage points, or 16 percent of the average rate.

JEL-codes: H25 H26 H71 L81 R51 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (15)

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DOI: 10.1257/pol.20170094

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