A tax on streaming services is being considered by politicians. In this research paper, the consequences of two tax variants are calculated: one at 3% (32 DKK) and 33% (356 DKK) per year.
A tax of 3% would not bring in substantial revenue, and would not be on par with the associated administrative costs. A tax of 33%, however, would result in a large deadweight loss for consumers, corresponding to 8% of revenue. In addition, such a high tax rate would put the tax base under pressure from companies that choose to allow Danes to purchase tax-free subscriptions abroad.
There are significant challenges in designing a streaming tax, both in practice and within EU law. A streaming tax would make the tax system less progressive, and would impact younger generations in particular. Older generations are already over-represented among viewers of traditional, tax-funded, flow television, so a streaming tax would exacerbate the generational imbalance in media policy.
A streaming tax would lead to greater socio-economic distortions than comparable income taxes; for that reason alone, it cannot be recommended (for the same reason, TV licenses, fuels, and the PSO levy on electricity were recently converted into income taxes). As long as there is a sizeable fiscal space and a high degree of fiscal sustainability, there is no reason to increase taxation.
Obligating streaming providers to carry a certain proportion of Danish productions would have the same effect as a tax, but would not give citizens the same rule of law protection as a formal tax.
It is a fundamental conclusion in the field of tax-economics that excise duties should only be used to address external costs associated with consumption, such as pollution. These taxes work by putting a price on the detrimental effects, reducing consumption in a welfare appropriate scope. A tax om heating should therefore be used neither to finance public expenses, nor for purposes related to redistribution policy. This is due to the fact that such taxes cause more distortion than equivalent income taxes.
There are no external cost which could justify a special streaming service tax. This holds regardless of whether the revenue is used to subsidise Danish TV and film production —even if the revenues are earmarked for that purpose. In that case, there would not only be an unnecessary consumption distortion associated with the tax; the subsidy would also be dependent on what funds the streaming tax happened to bring in.
In this research paper, an overview of the economic consequences of a tax on TV streaming services (Netflix, HBO, etc.) have been calculated.