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Tax Principles and Tariff-Tax Reforms under International Oligopoly

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  • Kenji Fujiwara

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

This paper, in a two-country duopoly model, compares destination- and origin-based commodity taxes in a context of a unilateral tariff-tax reform that fixes the world price and foreign welfare. We find that the proposed reform reduces domestic welfare, and hence is strictly Pareto-deteriorating under the destination principle while the opposite holds under the origin principle. Moreover, it is shown that this ranking is reversed if exports are taxed. In short, which is preferable between destination and origin taxation depends on the tax principle and which between imports and exports are taxed.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp116.pdf
File Function: First version, 2014
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 116.

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Length: 25 pages
Date of creation: Mar 2014
Date of revision: Mar 2014
Handle: RePEc:kgu:wpaper:116

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Keywords: tax principles; tariff-tax reform; destination-based consumption tax; origin-based production tax;

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References

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  1. Keen, M. & Ligthart, J.E., 2004. "Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition," Discussion Paper 2004-78, Tilburg University, Center for Economic Research.
  2. Pfluger, Michael & Andreas Haufler, 2003. "International Commodity Taxation under Monopolistic Competition," Royal Economic Society Annual Conference 2003 165, Royal Economic Society.
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  17. Scott McCracken & Frank Staehler, 2007. "Economic integration and the choice of commodity tax base with endogenous market structures," Working Papers 0701, University of Otago, Department of Economics, revised Feb 2007.
  18. Keen, Michael & Lahiri, Sajal, 1993. "Domestic tax reform and international oligopoly," Journal of Public Economics, Elsevier, vol. 51(1), pages 55-74, May.
  19. Kenji Fujiwara, 2013. "A Win–Win–Win Tariff–Tax Reform under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 857-867, November.
  20. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
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  24. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1997. "On the tying of aid to tariff reform," Journal of Development Economics, Elsevier, vol. 54(2), pages 479-491, December.
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