Going digital and getting 'smart' with data doesn't actually help local governments collect any more tax money.
March 25, 2026
Original Paper
WHEN DATA SCALES BUT TAXES DO NOT: EVIDENCE FROM FIRM-LEVEL FISCAL DYNAMICS
SSRN · 6463652
The Takeaway
It is often assumed that attracting high-tech, data-driven firms is a fiscal win for regions. However, this study shows that as these firms scale and become more data-mature, their tax-to-turnover ratio actually drops, meaning they contribute less to the public purse relative to their size than traditional firms.
From the abstract
This paper examines whether increasing data maturity within firms strengthens regional fiscal capacity. A three-year panel dataset of Latvia’s 101 most valuable enterprises (which together generate the bulk of national corporate tax revenue) is analysed. Firms are classified into four data maturity tiers based on the extent to which data extraction, commodification, exploitation, and centrality structure their business models. Pooled cross-sectional models with panel-robust (cluster-adjusted) st