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Public Good Provision and the Welfare Effects of Indirect Tax Harmonisation

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  • Sajal Lahiri
  • Pascalis Raimondos

Abstract

The paper considers the welfare effect of the harmonisation of indirect taxes which finances the production of a non-tradeable public good. Such harmonisation affects the prices of the private goods not only directly but also via changes in public good provision in each country. The welfare levels are affected via three channels: (i) changes in the prices of the private goods, (ii) changes in the levels of public good provision, and (iii) changes in deadweight loss associated with the taxes. We develop a number or rules of harmonisation and derive conditions under which they lead to potential and strict Pareto improvement.

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Bibliographic Info

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 95-13.

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Handle: RePEc:kud:epruwp:95-13

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  1. R. C. Cornes & A. G. Schweinberger, 1996. "Free Riding and the Inefficiency of the Private Production of Pure Public Goods," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 70-91, February.
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  3. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
  4. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 119-28, January.
  5. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  6. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, January.
  7. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, vol. 29(2), pages 133-172, March.
  8. Hans-Werner Sinn, 1991. "Tax Harmonization and Tax Competition in Europe," NBER Working Papers 3248, National Bureau of Economic Research, Inc.
  9. Hatzipanayotou, Panos & Michael, Michael S., 1995. "Foreign aid and public goods," Journal of Development Economics, Elsevier, vol. 47(2), pages 455-467, August.
  10. Keen, Michael, 1987. "Welfare effects of commodity tax harmonisation," Journal of Public Economics, Elsevier, vol. 33(1), pages 107-114, June.
  11. Abe, Kenzo, 1992. "Tariff Reform in a Small Open Economy with Public Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 209-22, February.
  12. Schweinberger, Albert G, 1995. "The Voluntary (Private) Production of Public Goods, the Gains from Trade, and Comparative Advantage," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 127-40, June.
  13. Turunen-Red, Arja H & Woodland, Alan D, 1990. "Multilateral Reform of Domestic Taxes," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 160-86, January.
  14. Keen, Michael & Lahiri, Sajal, 1993. "Domestic tax reform and international oligopoly," Journal of Public Economics, Elsevier, vol. 51(1), pages 55-74, May.
  15. 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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Cited by:
  1. Hadjiyiannis, Costas & Hatzipanayotou, Panos & Michael, Michael S., 2013. "Competition for environmental aid and aid fungibility," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 1-11.
  2. Jin-Hyuk Kim, 2013. "A simple model of copyright levies: implications for harmonization," International Tax and Public Finance, Springer, vol. 20(6), pages 992-1013, December.
  3. Miguel-Angel Lopez-Garcia, 1996. "The origin principle and the welfare gains from indirect tax harmonization," International Tax and Public Finance, Springer, vol. 3(1), pages 83-93, January.
  4. Lenka Janíčková, 2012. "Tax Harmonization – the Possible Way out of the Crisis?," Český finanční a účetní časopis, University of Economics, Prague, vol. 2012(1), pages 64-81.
  5. Humphery-Jenner, Mark, 2012. "The impact of the EU takeover directive on takeover performance and empire building," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 254-272.
  6. Lucas, Vander, 2001. "Tax harmonisation and the origin principle," Economics Letters, Elsevier, vol. 71(1), pages 111-115, April.
  7. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2005. "Globalization, Cross-Border Pollution and Welfare," CESifo Working Paper Series 1479, CESifo Group Munich.
  8. Kotsogiannis, Christos & Lopez-Garcia, Miguel-Angel & Myles, Gareth D., 2005. "The origin principle, tax harmonization and public goods," Economics Letters, Elsevier, vol. 87(2), pages 211-219, May.
  9. Michael Keen, 2002. "Some International Issues in Commodity Taxation," IMF Working Papers 02/124, International Monetary Fund.
  10. Schweinberger, A. G., 2002. "Foreign aid, tariffs and nontraded private or public goods," Journal of Development Economics, Elsevier, vol. 69(1), pages 255-275, October.
  11. Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2007. "Imperfect competition, indirect tax harmonization and public goods," International Tax and Public Finance, Springer, vol. 14(2), pages 135-149, April.
  12. Panos Hatzipanayotou & Sajal Lahiri & Michael Michael, 2008. "Cross-Border Pollution, Terms of Trade, and Welfare," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(3), pages 327-345, November.
  13. Miguel Angel López-García, 2004. "Welfare, Revenue and Indirect Tax Harmonization under the Origin Principle," Hacienda Pública Española, IEF, vol. 168(1), pages 9-25, marzo.
  14. Yann Duval, 2002. "Domestic Input Policies in Free Trade Areas with National Asymmetries," Eastern Economic Journal, Eastern Economic Association, vol. 28(2), pages 241-253, Spring.
  15. Owen,R.F. & Peters,Hans, 2000. "Optimal International Tax Coordination and Economic Integration: A Game-Theoretic Framework," Research Memorandum 036, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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