In March 2018, the European Commission proposed a Digital Services Tax (DST) on revenues earned from certain digital business activities. The new tax includes a 3% levy on: Online advertising, Seller/buyer fees transacted via online intermediaries and marketplaces and the sale of user data.
The DST raises both significant political and economic challenges. Since the entire economy is becoming digitised, how is it possible to define and ringfence the digital economy? Many institutions including the OECD worry about distortions to businesses inside vs outside the scope of the proposed new digital tax.
Copenhagen Economics is publishing a new study on the DST Proposal. The study analyses whether digital companies are massively evading tax, creating the need for a new levy. It also looks at the cost on consumers and whether the revenues raised will be meaningful.
Three main findings from the study are:
- Lack of justification for intervention: the rationale for introducing DST does not reflect the evidence that digital firms pay average corporate tax rates
- The EC’s IA does not fully consider the substantial distortions and costs to EU consumers and firms from this new tax
- Actual revenues from the proposal are likely to be significantly lower than suggested
Please click here to download the report
