Storm in the Cloud: A Study on the Macroeconomic Impact of the UK’s Digital Service Tax

María T. Álvarez Martínez, María Gesualdo and Jonathan Pycroft

Economic Systems Research, 2025, vol. 37, issue 2, 175-195

Abstract: The nature of the digital economy puts pressure on traditional tax practices, as it is frequently characterised by high returns from intangibles. In this paper, we assess the macroeconomic impact of the digital services tax introduced in the UK in 2020. We employ the CORTAX model, which is a macroeconomic model elaborated for the Member States of the European Union, the UK, the US, and Japan. The model strongly focuses on corporate taxation and multinational firms. To be able to represent the digital sector, a major extension of the model has been introduced to expand the model from one sector to two, allowing the digital sector to be modelled separately from the rest of the productive economy. The results suggest a negative impact on GDP from the introduction of the tax but a gain in welfare and consumption for the UK and small positive spillovers for close trading partners.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/09535314.2024.2374767 (text/html)
Access to full text is restricted to subscribers.

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:taf:ecsysr:v:37:y:2025:i:2:p:175-195

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CESR20

DOI: 10.1080/09535314.2024.2374767

Access Statistics for this article

Economic Systems Research is currently edited by Bart Los and Manfred Lenzen

More articles in Economic Systems Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().