Some time ago, these pages predicted that digital services taxes would prove to be sticky things. That is, once governments around the world went through the trouble of implementing DSTs — and once the receipts started to trickle in — legislators would find them difficult to eliminate. DSTs check too many of the boxes associated with a politically expedient tax regime.
The optics suggest that DSTs are a tax on capital income. Never mind that they’re a tax on gross receipts, which is a poor proxy for a firm’s profitability. The optics further suggest that the economic burden falls on nonresident corporations, probably the ones with a track record of profit shifting. Never mind that the burden might easily be passed on to the local residents who consume digital services — or that being a provider of digital services doesn’t tell us anything about whether the firm engages in aggressive tax planning.
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