Preferential Taxation of E-Commerce: Imperfectly Competitive Retail Markets and Trade Costs
AbstractE-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.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2004-9.
Date of creation: 21 Sep 2004
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Web page: http://www.econ.au.dk/afn/
E-commerce; imperfect competition; pro-competitive gains; trade diversion; commodity taxation; physical goods; trade costs;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-09-30 (Accounting & Auditing)
- NEP-ALL-2004-09-30 (All new papers)
- NEP-COM-2004-09-30 (Industrial Competition)
- NEP-NET-2004-10-30 (Network Economics)
- NEP-PBE-2004-09-30 (Public Economics)
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