| Project Detail |
Tackling digitalisation of the economy
The days when we conducted sales and financial transactions in person are dwindling, as digitalisation of tools and platforms is the norm. But, since its advent, businesses and people alike are increasingly avoiding most taxes and traditional banking systems. The question is, what do we need to adapt to this change? The EU-funded DIPAMUTA project will examine the regulation and/or public provision of digital payments; a potential tax on digital payments; and multidimensional taxation in a digitalised economy. DIPAMUTA will use multiple instruments and multiple dimensions of heterogeneity, which in turn will support multidimensional taxation in a digitalised economy.
Digitalization is revolutionizing our economies. The volume of digital payments has increased exponentially, fueled by electronic commerce and financial transactions. Giant internet platforms are now dominant players at the global level and manage to avoid most taxes. New payment service providers are undermining the traditional business model of banks. We lack a conceptual framework for guiding the regulatory and taxation reforms that are needed to adapt to this digital revolution. I will contribute to provide such a framework by examining 3 questions:
1. Digital payments: regulation and/or public provision?
I will study how the banking regulatory model, focused essentially on prudential and monetary issues, needs to be adapted to take care of antitrust and privacy issues. I will also examine if the public provision of digital payments can eliminate the risk of domination of the payments industry by a few private platforms.
2. Should we tax digital payments?
Current taxes on digital services and financial transactions are, by and large, evaded by businesses. An alternative is to introduce a (small) tax on all digital payments. It could generate a sizable revenue, would be easy to implement, difficult to avoid, but would also generate distortions. I will incorporate payments into a general equilibrium model, and carry out a cost benefit analysis of this “tax for the 21st century”.
3. Multidimensional taxation in a digitalized economy
Traditional sectors are deeply impacted by the digitalization of the economy. Thus, it would be appropriate to consider a global reform of the tax system. However, an important theoretical hurdle is to find a way to solve general screening problems with multiple instruments and multiple dimensions of heterogeneity, which nobody has done so far. Based on a recent breakthrough in numerical methods, I will provide such a general solution, and apply it to multidimensional taxation in a digitalized economy. |
