Scale Economies in Cross-Border Shopping and Commodity Taxation
AbstractA 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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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 6 (1999)
Issue (Month): 1 (February)
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Web page: http://www.springerlink.com/link.asp?id=102915
Tax Avoidance; Optimal Commodity Taxation; Cross-Border Shopping;
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