The erosive effect of digital economy on tax revenue: empirical evidence from urban panels in China

Abstract

ABSTRACT This paper analysed the impact of digital economy on tax revenue. By using China’s urban panel data from 2011 to 2021, the empirical results demonstrate that the development of the digital economy has a negative impact on Tax-to-GDP ratio. The underlying reason is that the digital economy has not led to a proportional increase in tax revenue while increasing the tax base. In other words, it reduces the effective tax rate. After considering factors such as endogeneity, this conclusion still holds.