Tax Principles and Tax Harmonization under Imperfect Competition: A Cautionary Example
AbstractThis paper shows that under imperfect competition the welfare effects of indirect tax harmonization may depend crucially on whether taxes are levied by the destination or the origin principle. In a standard model of imperfect competition, while harmonization always makes at least one country better off, and may be Pareto-improving, when taxes are levied under the destination principle (which currently applies in the European Union), harmonization of origin-based taxes (as recently proposed by the European Commission) is certain to be Pareto-worsening when the preferences in the two countries are identical, and is likely to be so even when they differ.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 518.
Date of creation: 2001
Date of revision:
Harmonization; destination principle; origin principle; commodity taxation;
Other versions of this item:
- Keen, Michael & Lahiri, Sajal & Raimondos-Moller, Pascalis, 2002. "Tax principles and tax harmonization under imperfect competition: A cautionary example," European Economic Review, Elsevier, vol. 46(8), pages 1559-1568, September.
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- Haufler, A. & Schjelderup, G. & Stahler, F., 2000.
"Commodity Taxation and International Trade in Imperfect Markets,"
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- Andreas Haufler & Guttorm Schjelderup & Frank Stähler, 2000. "Commodity Taxation and International Trade in Imperfect Markets," CESifo Working Paper Series 376, CESifo Group Munich.
- Andreas Haufler & Guttorm Schjelderup & Frank Staehler, 2000. "Commodity Taxation and international Trade in Imperfect Markets," CoFE Discussion Paper 00-32, Center of Finance and Econometrics, University of Konstanz.
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- Delipalla, Sophia, 1997. "Commodity tax harmonisation and public goods," Journal of Public Economics, Elsevier, vol. 63(3), pages 447-466, February.
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