Taxation of a digital monopoly platform

This paper investigates the impact on fiscal revenues of taxing a two-sided monopolistic platform offering personalized services to users and targeted advertising to sellers, based on the collection of users' personal data. We show that the introduction of a small tax on data collection, which has been proposed in the French context by Collin and Colin, fails to increase fiscal revenues if the value-added tax (VAT) rate is high enough, due to a tax base interdependence effect between the two taxes. Under a supermodularity condition on the platform's profit function as a function of its prices, this result generalizes to any per-unit tax. However, in some cases, an ad valorem tax on subscriptions or on advertising may raise fiscal revenues, irrespective of the VAT rate, as well as welfare.