## Taxing Cross-Border Services

_IMF Working Papers, July 17, 2026_

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## Bibliographic details
- Authors: Shafik Hebous, Brendan Crowley, Rasmi Das, Tibor Hanappi, Cory Hillier, Adam Jakubik, Eric Robert, Christophe J Waerzeggers
- Published: July 17, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229055048.001

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### Summary
- Faced with limitations of existing tax frameworks for cross-border trade in services—particularly the lack of taxing rights over certain income from highly digital business models and the continuing scope for profit shifting through payments for cross-border services—countries and scholars have adopted or proposed a wide range of tax measures.
- This paper brings these measures together in a coherent framework and examines them from both an economic and a legal perspective.
- The paper documents how cross-border services trade has:
  - grown,
  - become more digital in composition, and
  - become increasingly concentrated across sectors, firms, and jurisdictions.
- The paper develops a comparative synthesis covering:
  - destination-based consumption taxes such as VAT,
  - gross-revenue taxes—notably digital services taxes,
  - income-based instruments such as nexus and withholding rules, and
  - anti-avoidance rules aimed at limiting profit shifting through deductible cross-border payments.
- The paper argues:
  - that the economic incidence of each instrument is central to policy assessment, and
  - that evaluating these instruments in isolation obscures their interaction.
- Main conclusion:
  - Broader reliance on destination-based taxation can address many of the core problems raised by digitalized services trade more effectively than narrower, more distortionary alternatives.

### Key findings on cross-border services trade
- Trade has grown and shifted toward more digital composition.
- Activity has become increasingly concentrated across sectors, firms, and jurisdictions.
- Existing tax frameworks have limitations in taxing certain income from highly digital business models and in preventing profit shifting through payments for cross-border services.

### Comparative synthesis of tax instruments
- Destination-based consumption taxes:
  - VAT and similar destination-based consumption taxes are examined for their role in taxing cross-border services.
- Gross-revenue taxes:
  - Digital services taxes and other gross-revenue approaches are analyzed.
- Income-based instruments:
  - Nexus rules and withholding rules are compared as mechanisms to allocate taxing rights and collect tax on cross-border services income.
- Anti-avoidance rules:
  - Measures aimed at limiting profit shifting through deductible cross-border payments are evaluated.

### Policy assessment and analytic emphasis
- Emphasis on economic incidence:
  - The paper stresses that understanding who ultimately bears the tax burden (economic incidence) is central for assessing each instrument.
- Interaction effects:
  - Evaluating instruments in isolation is insufficient; their interactions can alter effectiveness and distortions.
- Policy implication:
  - A shift toward broader destination-based taxation is argued to be more effective and less distortive than narrower alternatives like some gross-revenue taxes.

### Publication and metadata
- Title: Taxing Cross-Border Services
- Authors: Shafik Hebous, Brendan Crowley, Rasmi Das, Tibor Hanappi, Cory Hillier, Adam Jakubik, Eric Robert, Christophe J Waerzeggers
- Date: July 17, 2026
- Series: IMF Working Papers
- Working Paper No.: 2026/152
- Volume: 2026
- Issue: 152
- Pages: 59
- DOI: https://doi.org/10.5089/9798229055048.001
- ISBN: 9798229055048
- ISSN: 1018-5941
- Subjects: Imports, Income, Income and capital gains taxes, International trade, National accounts, Taxes, Trade in services, Value-added tax
- Keywords: Digital Economy, Digital Service Taxes (DST), Global, Imports, Income, Income and capital gains taxes, profit-attribution rule, profits tax, services tax, Services Trade, tax analysis, tax implication, tax instrument, tax measure, Tax Policy, tax profits, Trade in services, Trade Policy, Value-added tax

*IMF Working Paper "Taxing Cross-Border Services", Working Paper No. 2026/152, July 17, 2026.*

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2026/07/17/taxing-cross-border-services-577853_