Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty
AbstractApplying a framework of perfect competition under uncertainty, we contribute to the discussion of whether or not ad valorem taxes and specific taxes are equivalent. While this equivalence holds without price uncertainty, we show that ad valorem taxes and specific taxes are “almost never” equivalent in the presence of uncertainty if we demand equivalence to hold pathwise. Since we obtain this result under perfect competition, our analysis also provides a further rationale for why the equivalence must fail under imperfect competition.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3946.
Date of creation: 2012
Date of revision:
ad valorem taxes and specific taxes; revenue neutrality; price uncertainty; concept of pathwise neutrality;
Other versions of this item:
- Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2012. "Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty," IAAEU Discussion Papers 201205, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
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