Navigating the Amazon: The Incidence of Digital Service Taxes

Dominika Langenmayr and Rohit Reddy Muddasani

No 12713, CESifo Working Paper Series from CESifo

Abstract: Firms in the digital economy often pay little tax in the countries where their customers are based. In response, market countries have introduced digital service taxes on the revenue of these firms to indirectly tax their profits. We study the incidence of these taxes using data on Amazon, the largest online retailer. We find that in most countries, Amazon increased its fees by roughly the amount of the digital service tax. Firms using Amazon as a platform have largely passed these increased fees on to consumers. Large digital firms thus bear only a small part of the tax burden, but the tax may nevertheless succeed in making them less competitive relative to brick-and-mortar retailers.

Keywords: tax incidence; digital service taxes; two-sided markets; platforms (search for similar items in EconPapers)
JEL-codes: D40 H22 L50 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12713

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