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Taxation in Digital Media Markets

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  • Hans Jarle Kind
  • Marko Köthenbürger

Abstract

Digital media goods and digital media platforms exhibit cost structures and network effects that imply that price and quantity effects of consumption taxes are qualitatively different compared to what we typically find for physical goods. For instance, in most European countries and US states, printed newspapers and books face favourable value-added taxes (VAT) or sales taxes. This has probably increased their circulation. However, reducing the VAT rate on digital newspapers has the opposite effects; it increases prices and leads to lower sales. This is not true for ebooks, but a low-tax policy is still ineffective if the aim is to reduce prices. The primary effect of exempting such product from value-added taxes is to increase profits for publishers.

Suggested Citation

  • Hans Jarle Kind & Marko Köthenbürger, 2016. "Taxation in Digital Media Markets," CESifo Working Paper Series 6202, CESifo.
    • Handle: RePEc:ces:ceswps:_6202
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    Cited by:

    1. Armando José Garcia Pires, 2023. "Ad-Valorem Taxes, Prices and Content Diversification in the News Market," Games, MDPI, vol. 14(2), pages 1-28, March.
    2. Juan Manuel Sánchez-Cartas, 2021. "Intellectual property and taxation of digital platforms," Journal of Economics, Springer, vol. 132(3), pages 197-221, April.
    3. KAO Kuo-Feng & MUKUNOKI Hiroshi, 2022. "Optimal Tariffs on a Monopoly Platform in Two-sided Markets," Discussion papers 22066, Research Institute of Economy, Trade and Industry (RIETI).
    4. Diego d’Andria, 2023. "Effects of an ad valorem Web Tax in a Cournot-Nash market for digital advertising," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 20-42, February.
    5. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    6. Leonardo Madio, 2023. "Content Moderation and Advertising in Social Media Platforms," "Marco Fanno" Working Papers 0297, Dipartimento di Scienze Economiche "Marco Fanno".
    7. Marko Köthenbürger, 2020. "Taxation of Digital Platforms," EconPol Working Paper 41, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Wei Cui & Nigar Hashimzade, 2019. "The Digital Services Tax as a Tax on Location-Specific Rent," CESifo Working Paper Series 7737, CESifo.

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    More about this item

    Keywords

    e-books; two-sided markets; media market; pricing strategy; preferential taxation; advertising; public policy;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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