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Taxation of a digital monopoly platform

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  • Marc Bourreau
  • Bernard Caillaud
  • Romain De Nijs

Abstract

This paper investigates the impact on fiscal revenues of taxing a two‐sided monopolistic platform offering personalized services to users and targeted advertising to sellers, based on the collection of users' personal data. We show that the introduction of a small tax on data collection, which has been proposed in the French context by Collin and Colin, fails to increase fiscal revenues if the value‐added tax (VAT) rate is high enough, due to a tax base interdependence effect between the two taxes. Under a supermodularity condition on the platform's profit function as a function of its prices, this result generalizes to any per‐unit tax. However, in some cases, an ad valorem tax on subscriptions or on advertising may raise fiscal revenues, irrespective of the VAT rate, as well as welfare.

Suggested Citation

  • Marc Bourreau & Bernard Caillaud & Romain De Nijs, 2018. "Taxation of a digital monopoly platform," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 40-51, February.
    • Handle: RePEc:bla:jpbect:v:20:y:2018:i:1:p:40-51
    DOI: 10.1111/jpet.12255
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    Cited by:

    1. Yassine Lefouili & Leonardo Madio & Ying Lei Toh, 2024. "Privacy Regulation and Quality‐Enhancing Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 662-684, June.
    2. Anna D'Annunzio & Mohammed Mardan & Antonio Russo, 2020. "Multi‐part tariffs and differentiated commodity taxation," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 786-804, September.
    3. Armando José Garcia Pires, 2023. "Ad-Valorem Taxes, Prices and Content Diversification in the News Market," Games, MDPI, vol. 14(2), pages 1-28, March.
    4. Jin, Laiqun & Cao, Kairui & Li, Jiaye & Xu, Qunfang, 2024. "Information infrastructure construction and optimization of resources allocation among firms: Evidence from “Broadband China” strategy," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 36-53.
    5. 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.
    6. Philipp Dimakopoulos & Slobodan Sudaric, 2017. "Privacy and Platform Competition," Working Papers 2017003, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    7. Eric K. Clemons & Maximilian Schreieck & Sebastian Hermes & Frantz Rowe & Helmut Krcmar, 2022. "The Cooperation Paradox," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 459-471, June.
    8. Lefouili, Yassine & Toh, Ying Lei, 2017. "Privacy and Quality," IDEI Working Papers 867, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2018.
    9. Juan Manuel Sánchez-Cartas, 2021. "Intellectual property and taxation of digital platforms," Journal of Economics, Springer, vol. 132(3), pages 197-221, April.
    10. KAO Kuo-Feng & MUKUNOKI Hiroshi, 2022. "Optimal Tariffs on a Monopoly Platform in Two-sided Markets," Discussion papers 22066, Research Institute of Economy, Trade and Industry (RIETI).
    11. Diego d’Andria, 2023. "Effects of an ad valorem Web Tax in a Cournot-Nash market for digital advertising," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 20-42, February.
    12. Dimakopoulos, Philipp & Sudaric, Slobodan, 2018. "Privacy and Platform Competition," Rationality and Competition Discussion Paper Series 67, CRC TRR 190 Rationality and Competition.
    13. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    14. Leonardo Madio, 2023. "Content Moderation and Advertising in Social Media Platforms," "Marco Fanno" Working Papers 0297, Dipartimento di Scienze Economiche "Marco Fanno".
    15. Francis Bloch & Gabrielle Demange, 2019. "Profit-Sharing Rules and the Taxation of Multinational Internet Platforms," CESifo Working Paper Series 7818, CESifo.
    16. Choi, Jay Pil & Jeon, Doh-Shin & Kim, Byung-Cheol, 2019. "Privacy and personal data collection with information externalities," Journal of Public Economics, Elsevier, vol. 173(C), pages 113-124.
    17. Leonardo Madio & Martin Quinn, 2024. "Content Moderation and Advertising in Social Media Platforms," CESifo Working Paper Series 11169, CESifo.
    18. Yassine Lefouili & Leonardo Madio & Ying Lei Toh, 2024. "Privacy regulation and quality-enhancing innovation," Post-Print hal-04774302, HAL.
    19. Abrardi, Laura & Cambini, Carlo, 2022. "Carpe Data: Protecting online privacy with naive users," Information Economics and Policy, Elsevier, vol. 60(C).
    20. Sangita Poddar & Tanmoyee Banerjee(Chatterjee) & Swapnendu Banerjee, 2023. "Taxation on duopoly e-commerce platforms and their search environments," SN Business & Economics, Springer, vol. 3(8), pages 1-20, August.
    21. Renato E. Reside, Jr., 2022. "Digital Services Taxes: Multilateral and Unilateral Efforts and an Overview of Recent Economic Models," UP School of Economics Discussion Papers 202203, University of the Philippines School of Economics.
    22. Eric K Clemons & Maximilian Schreieck & Sebastian Hermes & Frantz Rowe & Helmut Krcmar, 2022. "The Cooperation Paradox," Post-Print hal-04473840, HAL.
    23. Dimakopoulos, Philipp D. & Sudaric, Slobodan, 2018. "Privacy and platform competition," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 686-713.

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