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Scale Economies in Cross-Border Shopping and Commodity Taxation

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  • Kimberley Scharf

Abstract

A simple inventory theoretic model of cross-border shopping with transaction and storage costs is developed. Consumers incur fixed transaction and transportation costs to access the foreign market in which a perfect substitute of the domestic good is available. We show that the size of the optimal tax is inversely related to the size of domestic transactions. This result provides a simple example of a more general principle, that is, when there are increasing returns to scale in tax avoidance with respect to the quantities involved, then smaller transactions should be taxed more heavily than larger transactions. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1008652004940
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 6 (1999)
Issue (Month): 1 (February)
Pages: 89-99

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Handle: RePEc:kap:itaxpf:v:6:y:1999:i:1:p:89-99

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: Tax Avoidance; Optimal Commodity Taxation; Cross-Border Shopping;

References

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  1. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
  2. Harry Huizinga & Søren Bo Nielsen, . "The Taxation of Interest in Europe: A Minimum Withholding Tax?," EPRU Working Paper Series 97-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  3. Haufler, Andreas, 1996. "Tax Coordination with Different Preferences for Public Goods: Conflict or Harmony of Interest?," Munich Reprints in Economics 20392, University of Munich, Department of Economics.
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Citations

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Cited by:
  1. Alejandro Esteller-More (Universitat de Barcelona) & Leonzio Rizzo (Universita di Ferrara), 2009. "(Uncontrolled) Aggregate shocks or vertical tax interdependence? Evidende from gasoline and cigarettes," Working Papers in Economics 233, Universitat de Barcelona. Espai de Recerca en Economia.
  2. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
  3. Leonzio Rizzo, 2008. "Local government responsiveness to federal transfers: theory and evidence," International Tax and Public Finance, Springer, vol. 15(3), pages 316-337, June.
  4. Rizzo, Leonzio, 2005. "Interaction between Vertical and Horizontal tax Competition: Theory and Evidence," MPRA Paper 5334, University Library of Munich, Germany.
  5. Rizzo Leonzio, 2006. "Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici," Economia politica, Società editrice il Mulino, issue 1, pages 89-120.
  6. Hikaru Ogawa & Hiroshi Aiura, 2012. "Unit Tax versus Ad Valorem Tax: A Tax Competition Model with Cross-border Shopping," ERSA conference papers ersa12p428, European Regional Science Association.
  7. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
  8. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer, vol. 16(2), pages 135-148, May.

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