Tax on Digital Services: Assessment of the Advantage of the Introduction in Russia

Abstract

The topic of digital services tax (DST), applied in a number of foreign jurisdictions, remains relevant, and there is an active discussion in the scientific community on the advisability of introducing such a tax in Russia. The purpose of the study is to characterize the directions of the impact of such a tax on economic growth for the justification of the expediency of its introduction in Russia. The hypothesis is that the introduction of indirect DST will not lead to the withdrawal of part of the property of foreign digital giants in favor of the Russian budget, since the tax burden will be completely transferred to Russian consumers of these services, which in turn will have a negative impact on the economic growth of the domestic economy. The study of the theoretical foundations of DST and the practice of its application in foreign countries has revealed its inconsistency with the principles of neutrality and non-discrimination of taxation, the complexity of tax administration. Using economic and mathematical tools, a model was developed for transferring the tax burden when introducing DST from a foreign company to Russian clients of the platform and end consumers in Russia. A simulation experiment using Airbnb as an example showed that if a digital tax of 3% is introduced in Russia, Airbnb’s profit indicator is potentially expected to grow (which will be taxed in the Netherlands); decrease in profits of Russian Airbnb clients (Russian hotels); increase in Airbnb’s end-customer costs. Presumably, tolerable scenario is that the full burden of the digital tax will be passed on to domestic taxpayers due to the indirect nature of the digital tax. As a result of the study, the hypothesis about the lack of economic feasibility of introducing indirect DST in Russia was confirmed.