The Politics of Tax Policy in the Digital Age

Abstract

This chapter identifies three characteristics of digital business models that have implications for tax policy: (1) the creation of value using platform-enabled gig employment; (2) the creation of value on the basis of intangible assets like user-generated data; and (3) the creation of value from cross-national electronic commerce. The chapter outlines the challenges these characteristics pose for labor, corporate, and consumption taxes. It discusses the political dynamics emerging in response to these challenges, and tax policy changes that have already occurred. The chapter argues that digital business models have transformed neither the revenue capacity of rich democracies nor the composition of their taxes, but that this is likely to change if the contribution of digital business models to economic growth continues to grow. The emerging political dynamics identified in the chapter suggest some scope for increased tax progressivity in the digital age, primarily through the recalibration of international corporate taxation.