IDEAS home Printed from https://ideas.repec.org/p/aah/aarhec/2004-9.html
   My bibliography  Save this paper

Preferential Taxation of E-Commerce: Imperfectly Competitive Retail Markets and Trade Costs

Author

Listed:
  • Bo Sandemann Rasmussen

    (Department of Economics, University of Aarhus, Denmark)

Abstract

E-commerce in physical goods enhances the degree of product market competition but leads also to higher trading costs as goods bought through the internet are shipped individually. Do these features of e-commerce support a case for granting preferential tax treatment to online shopping? This is investigated using a model with a domestic monopolistic retailer and foreign competitive producers that can either deliver a physical good to the retailer (ordinary trade) or directly to domestic consumers (e-commerce). Although it is possible to construct cases of strictly positive welfare effects the general result is that granting tax preferences to e-commerce will have ambiguous welfare consequences.

Suggested Citation

  • Bo Sandemann Rasmussen, 2004. "Preferential Taxation of E-Commerce: Imperfectly Competitive Retail Markets and Trade Costs," Economics Working Papers 2004-9, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2004-9
    as

    Download full text from publisher

    File URL: https://repec.econ.au.dk/repec/afn/wp/04/wp04_09.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Huizinga, Harry & Nielsen, Soren Bo, 2003. "Withholding taxes or information exchange: the taxation of international interest flows," Journal of Public Economics, Elsevier, vol. 87(1), pages 39-72, January.
    3. Freund, Caroline L. & Weinhold, Diana, 2004. "The effect of the Internet on international trade," Journal of International Economics, Elsevier, vol. 62(1), pages 171-189, January.
    4. Goolsbee, Austan & Zittrain, Jonathan, 1999. "Evaluating the Costs and Benefits of Taxing Internet Commerce," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(3), pages 413-428, September.
    5. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
    6. Austan Goolsbee, 2000. "In a World Without Borders: The Impact of Taxes on Internet Commerce," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 561-576.
    7. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    8. Goolsbee, Austan & Zittrain, Jonathan, 1999. "Evaluating the Costs and Benefits of Taxing Internet Commerce," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 413-28, September.
    9. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    10. Bo Sandemann Rasmussen, 2004. "On the Possibility and Desirability of Taxing E-Commerce," Economics Working Papers 2004-8, Department of Economics and Business Economics, Aarhus University.
    11. Andersen, Torben M. & Rasmussen, Bo Sandemann & Sorensen, Jan Rose, 1996. "Optimal fiscal policy in open economies with labour market distortions," Journal of Public Economics, Elsevier, vol. 63(1), pages 103-117, December.
    12. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    13. Zodrow, George R, 2003. "Network Externalities and Indirect Tax Preferences for Electronic Commerce," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(1), pages 79-97, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bo Sandemann Rasmussen, 2004. "On the Possibility and Desirability of Taxing E-Commerce," Economics Working Papers 2004-8, Department of Economics and Business Economics, Aarhus University.
    2. Tessa Conroy & Harvey Cutler & Stephan Weiler, 2016. "The State-Level Impacts of Enforcing Sales Taxes for E-retail Purchases," Growth and Change, Wiley Blackwell, vol. 47(2), pages 276-295, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bo Sandemann Rasmussen, 2004. "On the Possibility and Desirability of Taxing E-Commerce," Economics Working Papers 2004-8, Department of Economics and Business Economics, Aarhus University.
    2. Ligthart, J.E., 2004. "Consumption Taxation in a Digital World : A Primer," Discussion Paper 2004-102, Tilburg University, Center for Economic Research.
    3. Beem, Richard & Bruce, Donald, 2021. "Failure to launch: Measuring the impact of sales tax nexus standards on business activity," Journal of Public Economics, Elsevier, vol. 201(C).
    4. Tiantian Dai & Shenyi Jiang & Xiangbo Liu & Wen Wang, 2016. "The Impact of Internet Sales Tax in a Search Model of Money: Some Analytical Results," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 133-144, May.
    5. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    6. Tessa Conroy & Harvey Cutler & Stephan Weiler, 2016. "The State-Level Impacts of Enforcing Sales Taxes for E-retail Purchases," Growth and Change, Wiley Blackwell, vol. 47(2), pages 276-295, June.
    7. Tsaur-Chin Wu & Chih-Ta Yen & Hsiu-Wei Chang, 2023. "Network externalities, trade costs, and the choice of commodity taxation principle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1203-1224, October.
    8. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1373-90, December.
    9. Charles E. McLure, Jr., 2002. "Thinking Straight about the Taxation of Electronic Commerce: Tax Principles, Compliance Problems, and Nexus," NBER Chapters, in: Tax Policy and the Economy, Volume 16, pages 115-140, National Bureau of Economic Research, Inc.
    10. Austan Goolsbee, 2001. "The Implications of Electronic Commerce for Fiscal Policy (and Vice Versa)," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 13-23, Winter.
    11. Elgin, Ceyhun, 2013. "Internet usage and the shadow economy: Evidence from panel data," Economic Systems, Elsevier, vol. 37(1), pages 111-121.
    12. Piazolo, Daniel, 2001. "The New Economy and the International Regulatory Framework," Kiel Working Papers 1030, Kiel Institute for the World Economy (IfW Kiel).
    13. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(4), pages 1373-1390, December.
    14. Steel, Will & Daglish, Toby & Marriott, Lisa & Gemmell, Norman & Howell, Bronwyn, 2013. "E-Commerce and its effect upon the Retail Industry and Government Revenue," Working Paper Series 4333, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    15. Tim Besley & Rohini Pande, 1998. "Read my lips: the political economy of information transmission," IFS Working Papers W98/13, Institute for Fiscal Studies.
    16. Raphaël Suire & Thierry Pénard & Fabrice Le Guel, 2005. "Adoption et usage marchand de l’Internet : une étude économétrique sur données bretonnes," Économie et Prévision, Programme National Persée, vol. 167(1), pages 67-84.
    17. Burnes, Daria & Neumark, David & White, Michelle J., 2012. "Fiscal Zoning, Sales Taxes, and Employment: Do Higher Sales Taxes Lead to More Jobs in Retailing and Fewer Jobs in Manufacturing?," IZA Discussion Papers 6383, Institute of Labor Economics (IZA).
    18. Steel, Will & Daglish, Toby & Marriott, Lisa & Gemmell, Norman & Howell, Bronwyn, 2013. "E-Commerce and its effect upon the Retail Industry and Government Revenue," Working Paper Series 19294, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    19. Brita Bye & Karine Nyborg, 1999. "The Welfare Effects of Carbon Policies: Grandfathered Quotas versus Differentiated Taxes," Discussion Papers 261, Statistics Norway, Research Department.
    20. Assaf Razin & Efraim Sadka & Chi-Wa Yuen, "undated". "Quantitative Implications of the Home Bias: Foreign Underinvestment, Domestic Oversaving, and Corrective Taxation," EPRU Working Paper Series 97-27, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.

    More about this item

    Keywords

    E-commerce; imperfect competition; pro-competitive gains; trade diversion; commodity taxation; physical goods; trade costs;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2004-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://www.econ.au.dk/afn/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.