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Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook

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  • Andrea Lassmann
  • Federica Liberini
  • Antonio Russo
  • Ángel Cuevas
  • Rubén Cuevas

Abstract

We analyze the effect and welfare implications of taxing multinational digital platforms on the global online advertising market. Using a novel dataset on advertising prices and product preferences of users from Facebook in OECD countries, jointly with international trade data, we show that an increase in the platform’s corporate tax rate in some countries had a strong effect on advertising prices therein. The increase spills over to other countries through pre-existing international trade linkages. This result is consistent with our theoretical model, which shows that a digital platform reduces the supply of ads to advertisers from countries where taxation increases.

Suggested Citation

  • Andrea Lassmann & Federica Liberini & Antonio Russo & Ángel Cuevas & Rubén Cuevas, 2020. "Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook," CESifo Working Paper Series 8149, CESifo.
    • Handle: RePEc:ces:ceswps:_8149
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    References listed on IDEAS

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    Cited by:

    1. Francis Bloch & Gabrielle Demange, 2021. "Profit-splitting rules and the taxation of multinational digital platforms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 855-889, August.
    2. David R. Agrawal & William F. Fox, 2021. "Taxing Goods and Services in a Digital Era," National Tax Journal, University of Chicago Press, vol. 74(1), pages 257-301.

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    More about this item

    Keywords

    online advertising; multi-sided platforms; tax incidence; product interests; international trade;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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