The Digital Services Tax on the Verge of Implementation

Canadian Tax Journal/Revue fiscale canadienne, 2019, Vol. 67, No. 4, p. 1135-1152

18 Pages Posted: 17 Jan 2020

See all articles by Wei Cui

Wei Cui

University of British Columbia (UBC), Faculty of Law

Date Written: December 27, 2019

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.

Keywords: digital, international taxation, technological change, tariffs, tax incidence, OECD

Suggested Citation

Cui, Wei, The Digital Services Tax on the Verge of Implementation (December 27, 2019). Canadian Tax Journal/Revue fiscale canadienne, 2019, Vol. 67, No. 4, p. 1135-1152. Available at SSRN: https://ssrn.com/abstract=3510270

Wei Cui (Contact Author)

University of British Columbia (UBC), Faculty of Law ( email )

1822 East Mall
Vancouver, British Columbia V6T1Z1
Canada
6048274765 (Phone)

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