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Many taxes can get passed onto the buyer of the taxed good, but I'm not convinced that digital advertising is one of them. Roughly speaking, digital advertisers
by ThrustVectoring 7y ago
Many taxes can get passed onto the buyer of the taxed good, but I'm not convinced that digital advertising is one of them. Roughly speaking, digital advertisers like Facebook and Google end up selling 100% of their inventory of views at a price set by the value of the conversions driven to the ad buyers. Adding a tax in this model forces advertisers to lower bids in order to remain profitable, which then forces the advertising platform to lower prices to continue selling 100% of their inventory.
This is the same economic modeling behind the incidence of land-value taxes falling on landlords, not renters. When you're taxing a product of fixed size that is priced at whatever the market will bear, taxes get taken out of the owners' economic rents.
- lstamour 7y agoThis logic assumes transparent pricing and that bids from international companies not subject to the tax won’t take over Canadian bids forcing prices back up to where they were... and I bet multinational organizations would avoid the tax by having US services bid for them. If the tax is on ads shown to Canadians rather than ads paid by Canadian companies, I don’t see how the government can force it short of banning Facebook altogether.