DIGITAL TAXATION AND THE FINANCIAL PERFORMANCE OF LISTED E-COMMERCE COMPANIES: A CONCEPTUAL ANALYSIS AND TESTABLE FRAMEWORK
Aliyu Aliyu Nahuche
Volume 6 Issue 1
Abstract
Governments increasingly tax digital activity through digital services taxes (DSTs), significant economic presence (SEP) rules and related levies, yet little is known about how these measures affect the financial performance of the e-commerce firms that bear them. This conceptual article draws on tax incidence theory, normative tax principles and the available empirical evidence to analyse the likely effects of digital taxation on the profitability, growth and returns of listed e-commerce companies. A simple illustration shows that a 3% tax on revenue removes 30% of the profit of a firm with a 10% margin and 60% of the profit of a firm with a 5% margin if none of it is passed on to customers, and that the burden disappears only under full pass-through. The review finds that existing evidence is concentrated on investor reactions, that accounting-based evidence is scarce, and that African studies are largely policy and legal analyses. The article proposes five testable propositions, a measure of firm-level digital tax exposure that does not depend on firms reporting digital tax paid, and a panel model for future empirical testing. It suggests that the design of a digital tax, including its base, thresholds and stability, is likely to matter more for firm performance than the existence of the tax as such. Keywords: Digital Services Tax; E-Commerce; Financial Performance; Tax Incidence; Significant Economic Presence
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