The digitalization of the economy is considered the most important development since the industrial revolution. The economic locational factors for digital business models are thus of high relevance for policy makers and corporate decision makers. Recent studies show that the economic conditions for innovation and digitalization differ widely across the globe. The tax attractiveness of a country is an important economic condition and leads to increased competition for international business locations.

The objective of the research project is to update the benchmark study of 2017 and to compare changes in tax provisions that are relevant for the location of digital businesses.

The relevant tax parameters (tax base, tax rates, tax treatment of cross-border transactions) will be researched based on a functional analysis of different digital business models. The parameters are consolidated in the calculation of effective tax burdens following the methodology put forward by Devereux and Griffith (1999, 2003). Both, the after-tax profitability of an investment as well as the relative attractiveness of a location can be determined based on the cost of capital and the effective average tax rate that depend on the location and the business model of the investment. The study will provide an objective measure to evaluate corporate investment decisions and tax policy affecting digital business models.

The respective results are of high relevance for managers and policy makers since functions and personnel within digital value chains are highly mobile and foreign markets can be accessed without any substantial physical presence.