Whistling in the Dark? Equity Market Reactions to Digital Service Tax Proposals

Abstract

The taxation regime to which online multinational platforms are subject to has been the centre of a fierce debate in recent years. Whereas international consensus has yet to be reached, different countries have taken unilateral action by enacting versions of a "Digital Service Tax". We conduct a financial event study to provide a first evaluation of the impact of these proposed taxes and the recent Global Tax proposal on dominant online platforms and other market stakeholders. Most initiatives had little and not significant impact on digital firms. At the same time, we identify a negative and significant impact of the initial European Commission-OECD digital tax proposal, driven mainly by the GAFAM equity returns.

Keywords: digital tax, multinational firms, digital platforms, event study, online advertising, e-commerce

JEL Classification: L86, H25, M37, F23