Digital Services Taxes State of Play by Daniel Bunn published by Tax Foundation (7/2025)
Policymakers continue to debate international tax rules after the US gained agreement on a new approach at the G7 that could result in US anti-avoidance policies existing side-by-side with the global minimum tax.
The US approach to the now-abandoned Canadian Digital Services Tax (DST) raises the question of whether other DSTs will be targeted again with trade measures.
Foreign DSTs raise relatively little revenue, their incidence largely falls on consumers, and they invite trade threats. Countries should pivot to raising revenue on digital services through value-added taxes (VATs) if they have not done so already.
Navigating the Amazon: The Incidence of Digital Service Taxes by Dominika Langenmayr and Rohit Reddy Muddasani published by Vienna University of Economics and Business (6/2025)
Firms in the digital economy often pay little tax in the countries where their customers are based. In response, market countries have introduced digital service taxes on the revenue of these firms to indirectly tax their profits. We study the incidence of these taxes using data on Amazon, the largest online retailer. We f ind that, on average, Amazon increased its fees by roughly half the amount of the digital service tax. Firms using Amazon as a platform have largely passed these increased fees on to consumers. Large digital firms thus bear only a small part of the tax burden, but the tax may nevertheless succeed in making them less competitive relative to brick-and-mortar competitors.
Digital Taxation around the World by Cristina Enache published by Tax Foundation (6/2025).
• There is a geographic mismatch between the location of individuals who use digital platforms and the location where those products are developed. In 2020, while 40 percent of the value created in information industries originated in North America, 40 percent of global internet users were based in East and Southeast Asia.
• The growth of the digital economy in recent decades has been paired with policy debates about the taxes digital companies pay and where they pay them.
• In the absence of a multilateral change to tax policies, a significant number of countries adopt ed unilateral tax measures targeted at digital businesses, including digital services taxes (DSTs), gross-based withholding taxes, and digital permanent establishment rules.
• Currently, 18 countries have implemented unilateral DSTs, and Canada will be joining this group soon.
• The United States, home of most of the companies impacted by DSTs, plans to eliminate DSTs either though a multilateral agreement or through trade threats and potential trade wars.
• The multilateral solution of Amount A from Pillar One creates clear winners and losers, and the United States holds the keys to getting the treaty ratified or not. Nevertheless, even if the treaty gets ratified, it may not result in the removal of all DSTs.
• If a multilateral solution is not reached, DSTs will continue to spread, resulting in uncertainty and double taxation.
• One hundred and one countries have implemented a value-added tax (VAT) or goods and services tax (GST) on cross-border online sales. In the EU, VAT revenues collected from these measures increased sevenfold in seven years, between 2015 and 2022. Additionally, the maximum revenue potential of a VAT on e-commerce is 2.5 times higher than that of tariffs at the current rates.
• Instead of utilizing these distortionary taxes, countries should expand consumption taxes to in clude digital services and products, achieving a neutral broadening of the tax base.