Global spillovers of taxation in the online advertising market. Theory and evidence from facebook Articles uri icon

publication date

  • February 2025

volume

  • 172

International Standard Serial Number (ISSN)

  • 0014-2921

Electronic International Standard Serial Number (EISSN)

  • 1873-572X

abstract

  • We study the effect of corporate taxes on multinational digital platforms and the global online advertising market. Using a novel dataset of advertising prices and user product preferences from Facebook, jointly with international trade data, we show that an increase in the platform"s corporate tax rate in several countries had a sizeable effect on advertising prices therein. Given the platform"s two-sided and multinational structure, we also document substantial spillovers in the effects of ad prices across countries. The results are consistent with our theoretical model, which shows that, due to consumers" limited tolerance for ads, the platform reduces the supply of ads to advertisers located in countries where it faces a higher tax rate.

subjects

  • Computer Science
  • Telecommunications

keywords

  • online advertising; two-sided platforms; corporate taxes; pass-through; international trade; gravity