Pre-tax car prices are particularly low in EU countries with high registration taxes but no car production, meaning that the tax is equivalent to an import tariff and induces international price discrimination. The paper develops a theorectical model to analyse the European Commission's policy of facilitating arbitrage and thereby reducing car price differences. The effects on prices, quantities and welfare depend crucially on whether the tax is exogenous or whether it is set optimally by the importing country. The optimal tax rate depends positively on the car manufacturers' scope to price discriminate. Thus when arbitrage costs fall, tax rates are reduced.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by University of Nottingham, GEP in its series Discussion Papers with number
07/45.