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The Digital Services Tax on the Verge of Implementation

Author

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  • Wei Cui

    (Allard School of Law, University of British Columbia)

Abstract

France enacted the digital services tax (DST) in 2019, and similar legislation is pending in the United Kingdom, Spain, Italy, and other countries. The DST can be viewed as a tax on location-specific rent (LSR), and it arguably solves genuinely new problems in international taxation. The author briefly reviews this justification of the DST and further examines the DST design in light of three criticisms. The first criticism is that certain features of the DST render it similar to distortionary import tariffs. The second is that the DST would not be borne by digital platforms but would only be shifted to platform users. The third is that governments promoting the DST seem not to characterize it as a tax on LSR but, instead, have advocated reforming the income tax. The author suggests ways of rationalizing the DST's tariff-like features, refutes casual arguments about the DST's incidence, and offers a framework for understanding why small economies might advocate simultaneously for the DST and for the reformation of international income taxation.

Suggested Citation

  • Wei Cui, 2019. "The Digital Services Tax on the Verge of Implementation," Canadian Tax Journal, Canadian Tax Foundation, vol. 67(4), pages 1135-1152.
    • Handle: RePEc:ctf:journl:v:67:y:2019:i:4:p:1135
    DOI: https://doi.org/10.32721/ctj.2019.67.4.sym.cui
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    Cited by:

    1. Akira Matsuoka, 2021. "The new international tax regime: analysis from a power-basis perspective," SN Business & Economics, Springer, vol. 1(5), pages 1-23, May.
    2. Wolfram F. Richter, 2022. "Taxing Multinational Enterprises: A Theory-Based Approach to Reform," CESifo Working Paper Series 10119, CESifo.
    3. Wolfram F. Richter, 2022. "Granting Market Countries the Right to Tax Profit without Physical Nexus," CESifo Working Paper Series 9556, CESifo.

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