Adam B. Thimmesch
The technological developments of recent decades have allowed data to emerge as the functional equivalent of a currency in the digital economy. One result is that individuals now have the ability to obtain a wide variety of benefits, from cash discounts to access to news, social media, and online software, in exchange for their personal data. Scholars in a variety of fields recognize these personal-data transfers as market exchanges and have questioned the functioning and impact of the personal-data market. That market is currently invisible, however, for tax purposes. Neither the receipt of an individual’s data as consideration for digital products nor an individual’s receipt of benefits in exchange for data is currently recognized as a taxable event. The result is not only potentially lost tax revenue, but also a tax preference for the use of data as a currency. This implicit personal-data tax exemption thus has implications for the design of our tax systems in the new economy and for how we regulate the data market in other ways. The article therefore offers further insight into the tax-reform efforts directed towards base erosion and profit shifting in the digital economy, encourages thought regarding the use of alternative tax instruments to address the erosion of traditional tax bases and to promote beneficial data practices, and urges the recognition of the tax preference for data in the broader U.S. regulatory structure related to data and personal privacy.