Paternalism and Tax Competition
AbstractWhen consumers make mistakes, the government may wish to use paternalistic taxation as a corrective measure. We analyse the extent to which tax competition undermines the feasibility of paternalistic taxation. We show that the paternalistic component of a tax on a harmful good is reduced when there is cross-border shopping, but it does not disappear altogether. In a model with tax competition between two countries, only one of which has a paternalistic objective, we show that a minimum tax rate requirement can be Pareto improving despite the divergence in policy objectives. Tax harmonization, however, reduces welfare in the non-paternalistic country. Copyright � The editors of the "Scandinavian Journal of Economics" 2009 .
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 111 (2009)
Issue (Month): 1 (03)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
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