Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook

70 Pages Posted: 18 Jun 2020

See all articles by Andrea Lassmann

Andrea Lassmann

ETH Zürich - KOF Swiss Economic Institute

Federica Liberini

ETH Zürich - KOF Swiss Economic Institute

Antonio Russo

Loughborough University

Ángel Cuevas

Charles III University of Madrid

Ruben Cuevas

Charles III University of Madrid

Date Written: 2020

Abstract

We analyze the effect and welfare implications of taxing multinational digital platforms on the global online advertising market. Using a novel dataset on advertising prices and product preferences of users from Facebook in OECD countries, jointly with international trade data, we show that an increase in the platform’s corporate tax rate in some countries had a strong effect on advertising prices therein. The increase spills over to other countries through pre-existing international trade linkages. This result is consistent with our theoretical model, which shows that a digital platform reduces the supply of ads to advertisers from countries where taxation increases.

Keywords: tax incidence, online advertising, Facebook

JEL Classification: H220, H250, F230

Suggested Citation

Lassmann, Andrea and Liberini, Federica and Russo, Antonio and Cuevas, Ángel and Cuevas, Ruben, Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook (2020). CESifo Working Paper No. 8149, Available at SSRN: https://ssrn.com/abstract=3552389 or http://dx.doi.org/10.2139/ssrn.3552389

Andrea Lassmann (Contact Author)

ETH Zürich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

Federica Liberini

ETH Zürich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

Antonio Russo

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

Ángel Cuevas

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Ruben Cuevas

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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