Italyβs recent decision to unilaterally introduce a digital services tax consistent with the taxation scheme proposed by the European Commission raises a number of interesting matters. These matters are related to the peculiar nature of this levy, which taxes total revenues collected from multinationals but apportions the corresponding tax yield among single member states according to the domestic share of digital users.
The central purpose of this work is to analyse what possible configuration the EU digital services taxation system could take in the wake of the unilateral measure taken by Italy and of the reactions by other EU countries. In particular, this work points out that a critical element for the possible tax strategies to be adopted by national tax authorities is the joint consideration of two geographical allocations: digital service sales and digital users.
The rest of the work is organised as follows. Section 2 discusses issues in taxing the digital economy and illustrates the more recent policy initiatives proposed, or implemented, at international and national level, to cope with these problems. In particular, the proposal of a digital services tax (DST) put forward by the European Commission is described together with the specific DST that will unilaterally be applied by Italy, starting from 2019. Section 3 presents a simplified general framework, useful for highlighting the main elements of the DST scheme and of the possible strategies that could be adopted by single countries to tax the digital economy. In Section 4 we try to empirically apply the predictions derived from the general framework, by using data about online advertising markets in different European countries. Section 5 concludes
