The Internet as a Tax Haven?

David Agrawal

No 8924, CESifo Working Paper Series from CESifo

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 one standard deviation increase in internet penetration lowers local sales taxes in large municipalities by 0.15 percentage points or 16% of the average rate.

Keywords: e-commerce; online shopping; sales tax; tax competition (search for similar items in EconPapers)
JEL-codes: H25 H71 H73 L81 R50 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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