Digital Services Taxes

The United Kingdom (UK) adopted “value creation” as the guiding principle for designing its digital services tax (DST). This article argues that this principle acts as a double-edged sword. On the one hand, it fits the UK’s general view on the allocation of taxing rights and provides some cover against criticism of the DST. On the other hand, this principle, which is questionable on positive and normative grounds, gives rise to a number of difficult design and implementation issues for the DST. The article concludes that the value creation principle leads to a tax that is complex, arbitrary, and hard to comply with and enforce.