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Scale Economies in Cross-Border Shopping and Commodity Taxation

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Author Info

  • 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. 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.
  2. Andreas Haufler, 1996. "Tax coordination with different preferences for public goods: Conflict or harmony of interest?," International Tax and Public Finance, Springer, vol. 3(1), pages 5-28, January.
  3. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
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Cited by:
  1. Rizzo, Leonzio, 2005. "Interaction between Vertical and Horizontal tax Competition: Theory and Evidence," MPRA Paper 5334, University Library of Munich, Germany.
  2. Alejandro Esteller-Moré & Leonzio Rizzo, 2009. "(Uncontrolled) Aggregate shocks or vertical tax interdependence? Evidence from gasoline and cigarettes," Working Papers 2009/24, Institut d'Economia de Barcelona (IEB).
  3. repec:ept:journl:v:xxiii:y:2006:i:77en:p:89-120 is not listed on IDEAS
  4. 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.
  5. 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.

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