A Game Model Analysis of the International Digital Service Tax in an Asymmetric Market Duopoly

Abstract

Against the backdrop of the rapidly expanding digital economy, multinational corporations are increasingly exploiting information asymmetry in the market to employ covert and diverse methods of tax avoidance. This poses a significant challenge to tax collection and administration. The proposal of a digital service tax aims to adapt the international tax system to the digitalization of the economy, ensuring fair and reasonable tax payments. To address these challenges, this article assumes an asymmetric international digital economy market and a domestic market characterized by duopoly. It establishes an asymmetric market duopoly game, calculates the digital gains of each country's market using the logistic function, determines the Nash equilibrium of the data service tax game, and analyzes the relationship between the digital service tax rates of strong and weak countries in the digital economy.