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Tacit Collusion under Destination- and Origin-Based Commodity Taxation

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Author Info

  • Haufler, A.
  • Schjelderup, G.

Abstract

The paper employs a standard model of dynamic price competition to study how international principles of value-added taxation affect the stability of collusive agreements when producers in an international duopoly agree not to export into each other's home market. If costs of production are zero, international tax differentials reduce support for collusive agreements under the destination, but not under the origin principle. When positive costs of production are introduced, however, the ranking of the two tax principles becomes ambiguous. We also show that tax harmonization - taken to imply an increase in the VAT rate of the low-tax country - increases the likelihood of tacit collusion under both the destination principle and the origin principle.

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Bibliographic Info

Paper provided by Norwegian School of Economics and Business Administration- in its series Papers with number 8/99.

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Length: 31 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:norgee:8/99

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Postal: NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, HELLEVEIEN 30, 5035 BERGEN SANDVIKEN NORWAY.
Phone: 5595 9000
Fax: 5595 9100
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Web page: http://www.nhh.no/
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Keywords: MARKET STRUCTURE ; TAXATION ; GOVERNMENT;

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References

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Cited by:
  1. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 577-600, March.
  2. Schindler, Dirk & Schjelderup, Guttorm, 2007. "Harmonization of Corporate Tax Systems and its Effect on Collusive Behavior," Discussion Papers 2007/8, Department of Business and Management Science, Norwegian School of Economics.

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