Advanced Search
MyIDEAS: Login to save this paper or follow this series

Competition and Welfare Effects of VAT Exemptions

Contents:

Author Info

  • Helmut Dietl

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Christian Jaag

    ()
    (Institute of Public Finance and Fiscal Law, University of St. Gallen)

  • Markus Lang

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Urs Trinkner

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

Distortions under the value-added tax (VAT) arise mainly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities or differentiated tax rates. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate the main competitive impact of VAT policies while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field, consumer surplus, and government tax revenue.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/133_ISU_full.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0133.

as in new window
Length: 26 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:iso:wpaper:0133

Contact details of provider:
Postal: Plattenstrasse 14, CH-8032 Z├╝rich
Phone: ++41 1 634 29 27
Fax: ++41 1 634 43 48
Email:
Web page: http://www.isu.uzh.ch
More information through EDIRC

Related research

Keywords: Value-added tax; indirect taxation; tax regulation; tax exemption; universal service obligation; postal sector;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christian Jaag, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," Working Papers 0006, Swiss Economics.
  2. De Donder Philippe & Cremer Helmuth & Dudley Paul & Rodriguez Frank, 2009. "On the Value Added Taxation Status of National Postal Operators," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-22, September.
  3. Giesecke, James A. & Tran, Nhi Hoang, 2009. "Modelling value-added tax in the presence of multiproduction and differentiated exemptions," MPRA Paper 13914, University Library of Munich, Germany.
  4. Michael Keen, 2007. "VAT Attacks!," IMF Working Papers 07/142, International Monetary Fund.
  5. Cnossen, Sijbren, 2003. "How Much Tax Coordination in the European Union?," International Tax and Public Finance, Springer, vol. 10(6), pages 625-49, November.
  6. Helmut Dietl & Christian Jaag & Markus Lang & Martin Lutzenberger & Urs Trinkner, 2010. "Impact of VAT Exemptions in the Postal Sector on Competition and Welfare," Working Papers 0145, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. Helmut M. Dietl & Urs Trinkner & Reto Bleisch, 2004. "Liberalization and Regulation of the Swiss Letter Market," Working Papers 0001, Swiss Economics, revised Jul 2005.
  8. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association, vol. 59(4), pages 905-28, December.
  9. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer, vol. 5(3), pages 399-428, July.
  10. Christian Jaag, 2010. "Compensating the Net Cost of Universal Postal Services," Working Papers 0017, Swiss Economics.
  11. Christian Jaag & Urs Trinkner, 2010. "The interaction of universal service costing and financing in the postal sector: A calibrated approach," Working Papers 0019, Swiss Economics.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iso:wpaper:0133. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IBW IT).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.