Digital Services Taxes and Economic Growth: Staggered-Adoption Evidence and the Limits of Causal Inference

Digital Services Taxes (DSTs) tax the revenue that large digital platforms earn in a country, and critics warn that they slow economic growth. This study tests that claim using data for nine countries that adopted a DST and seven that did not over 2015–2024, with pooled OLS, two-way fixed effects and the Callaway–Sant’Anna staggered difference-in-differences estimator. The results show no evidence that DSTs harmed growth. On the contrary, annual GDP growth in adopting countries was 1.57 percentage points higher after adoption, and the Callaway–Sant’Anna estimate is similar (1.74 points). The positive association was strongest in highly connected economies, reaching 1.72 points where 90% of the population uses the internet. These findings challenge the view that DSTs act as growth-damaging sales taxes and suggest that digital platforms can be taxed at rates of 1.5–7.5% without a detectable growth cost. Because the higher growth is an association rather than a proven effect of the tax, governments should judge DSTs mainly on their revenue, fairness and trade merits. The study provides the first cross-country evidence on DSTs and growth and recommends that adopting countries publish DST revenue data so that each levy can be evaluated.