Tax Shifting of International Digital Services Taxes: Implications for China's Participation in International Tax Reform

The emergence of digital services taxes (DSTs) has exacerbated the difficulty of international tax coordination, making an examination of their tax-shifting effects crucial to China's participation in international tax reform. Using Chinese cross-border e-commerce export data at the destination country–product–year–month level for 2019–2021, this paper investigates tax-shifting behavior induced by DSTs by examining how the implementation of DST policies in destination countries affects China's cross-border e-commerce exports. The results show that the tax burden created by DSTs can be shifted, ultimately reducing the scale of China's cross-border e-commerce exports. An analysis of the channels of tax shifting finds that large internet companies shift the tax burden to cross-border e-commerce firms by raising fulfillment and advertising fees, while cross-border e-commerce firms further shift the burden to consumers in destination countries by increasing product prices. Estimates of the extent of tax shifting indicate that large internet companies achieve overshifting by leveraging their dominant market positions; the tax burden is borne primarily by cross-border e-commerce firms and partly by consumers. Further analysis finds that a competitive digital market structure and stricter data restrictions can mitigate the adverse effects of DSTs. This paper extends research on international tax shifting to the context of the digital economy and reveals the channels through which tax burdens are shifted. It recommends that the Chinese government adopt a proactive and cooperative stance in international tax reform and reduce the adverse effects of DSTs through measures such as providing targeted policy support, establishing a multidimensional autonomous system, and strengthening cross-border digital economic cooperation, thereby achieving mutual benefits and win-win outcomes with destination countries.