Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/201963 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7737
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In 2018, the European Council and the UK and Spanish governments each proposed to introduce a Digital Services Tax (DST), to be levied on the revenue of large digital platforms from advertising, online intermediation, and/or the transmission of data. We offer a rationalization of the DST as a tax on location-specific rent (LSR). That is, just as many countries already levy royalties on rent from extracting natural resources, one can think of the DST as levied on rent earned by digital platforms from particular locations. We provide stylized illustrations of how platform rent can be assigned to specific locations, even when users from multiple jurisdictions participate. We then elaborate the analogy between the DST and resource royalties, and analyze the DST’s incidence and effect on consumer welfare using a simple model. Finally, we argue that the DST suggests useful directions for redesigning international taxation in the age of labor-replacing AI technology.
Subjects: 
digital services tax
international taxation
location-specific rent
digital platforms
JEL: 
H201
H25
K34
M37
M48
Document Type: 
Working Paper
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