VAT Reform via Monopolistic Platformer in Borderless Economy : Price Pass-Though and Efficiency Consequences

Material type: 規格・テクニカルリポート類

Author: Morita, Shigeoほか

Publisher: Graduate School of Economics, Osaka University

Publication date: 2025-07

Material Format: Paper

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Note (General)：: Revised：Tax Reform on Monopoly Platformer in Borderless Economy : The Incidence on Prices and Efficiency Consequences / Shigeo Morita, Yukihiro Nishim...

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Paper

Material Type: 規格・テクニカルリポート類
Title: VAT Reform via Monopolistic Platformer in Borderless Economy : Price Pass-Though and Efficiency Consequences
Author/Editor: Morita, Shigeo
Nishimura, Yukihiro
Author Heading: Morita, Shigeo
https://nrid.nii.ac.jp/nrid/1000000802737
Nishimura, Yukihiro
https://nrid.nii.ac.jp/nrid/1000090345471
Publication, Distribution, etc.: Graduate School of Economics, Osaka University
Publication Date: 2025-07
Publication Date (W3CDTF): 2025-07
Periodical title: Discussion Papers In Economics And Business
No. or year of volume/issue: 25-02-Rev.2
Volume: 25-02-Rev.2
Text Language Code: eng
Subject Heading: Value-added tax
Tax reform
Digital economy
Platform
Network externality
H25
H26
F23
L13
L86
Target Audience: 一般
Note (General): Revised：Tax Reform on Monopoly Platformer in Borderless Economy : The Incidence on Prices and Efficiency Consequences / Shigeo Morita, Yukihiro Nishimura, Hirofumi Okoshi [25-02-Rev., 2025]
The development of online markets has raised ongoing concerns that foreign app service developers are avoiding value-added tax (VAT) in destination countries. To address this issue, some countries have introduced tax reforms that require platforms to pay VAT on behalf of foreign firms based on the sales generated by each firm. This study investigates whether preventing tax leakage through platform taxation improves welfare in the destination country. We first show that taxing foreign firms leads to a reduction in the commission fees charged by the platform to the sellers (developers) which replaces exited foreign developers with domestic ones. However, the increased tax burden also decreases the size of the network user base. Given this trade-off, we demonstrate that whether the domestic welfare increases after the tax reform depends critically on how responsive the sellers’ market entry is to network size. When the tax reform brings welfare gain, it increases with the tax rate and reduces with the initial share of foreign developers. Finally, we show that digitalization mitigates both welfare loss and the platform’s tax avoidance.
References (URI): comment:URI
https://www2.econ.osaka-u.ac.jp/econ_society/dp/2502R2.pdf
Data Provider (Database): 国立情報学研究所 : 学術機関リポジトリデータベース（IRDB）（機関リポジトリ）
https://irdb.nii.ac.jp
Original Data Provider (Database): 大阪大学 : 大阪大学学術情報庫　桜華