Indirect taxation of monopolists: A tax on price
AbstractA digressive tax like a variable rate sales tax or a tax on price gives firms an incentive for expanding output. Thus, unlike unit and ad valorem taxes which amplify the harm from monopoly, a digressive tax lessens the harm. We analyse a tax on price with respect to efficiency and practical policy appeal. Using a tax on price in combination with ad valorem taxation it is possible to achieve the Ramsey solution. That is, the combination of the two taxes secures tax revenue in the least distortive way. We also show how tax reforms based only on observation of price and quantity can make use of a tax on price in order to improve welfare. That is, it is practical to use a tax on price. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2012-60.
Date of creation: 2012
Date of revision:
tax on price; ad valorem tax; tax incidence;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-01-07 (Accounting & Auditing)
- NEP-ALL-2013-01-07 (All new papers)
- NEP-MIC-2013-01-07 (Microeconomics)
- NEP-PBE-2013-01-07 (Public Economics)
- NEP-PUB-2013-01-07 (Public Finance)
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- Stephen F. Hamilton, 2009. "Excise Taxes with Multiproduct Transactions," American Economic Review, American Economic Association, vol. 99(1), pages 458-71, March.
- Sumner, Michael, 1993. "Tax on Price: A Comment," Public Finance = Finances publiques, , vol. 48(2), pages 297-302.
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