The Incidence of Non-Linear Consumption Taxes
AbstractThe present article generalyses economic litterature on consumption tax incidence to general forms of consumption taxes. Previous studies were limited to the cases of per unit and ad valorem taxes. Three main contributions are provided. From a methodological point of view, the elasticity of the tax function is introduced as a new parameter to take the shape of general consumption tax schedules into account in different models of imperfect competition in a tractable manner. From a theoretical point of view, existing results on the difference of incidence of ad valorem and per unit consumption taxes are generalized to non-linear consumption taxes: the larger the elasticity of the tax function the weaker the share of the consumption tax beared by consumers. From anapplied public economic point of view, it is shown how the regulator may put downwards prices on very uncompetitive markets by increasing the elasticity of the consumption tax on a targeted window of producer prices.
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Bibliographic InfoPaper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2013-19.
Date of creation: 2013
Date of revision:
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Consumption taxes; Imperfect Competition; Tax Incidence; Efficiency.;
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-PBE-2013-04-13 (Public Economics)
- NEP-PUB-2013-04-13 (Public Finance)
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