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Cross-border or Online - Tax Competition with Mobile Consumers under Destination and Origin Principle

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  • Birg, Laura

Abstract

This paper studies the effect of an online retailer on spatial tax competition with mobile consumers. If taxation for online purchases follows the destination principle, in many cases, the entry of the online retailer mitigates tax competition. If taxation for online purchases follows the origin principle, the entry of the online retailer typically enhances tax competition. Cooperation between government reverses this effect. For sufficiently low (high) online shopping costs, welfare in the online retailer’s home country is higher under the origin (destination) principle, while welfare in the other country is higher under the destination (origin) principle. Global welfare is higher under the destination principle.

Suggested Citation

  • Birg, Laura, 2018. "Cross-border or Online - Tax Competition with Mobile Consumers under Destination and Origin Principle," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181645, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181645
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    References listed on IDEAS

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    Cited by:

    1. Hiroshi Aiura & Hikaru Ogawa, 2021. "Does E-Commerce Ease or Intensify Tax Competition? Destination Principle vs. Origin Principle," CIRJE F-Series CIRJE-F-1169, CIRJE, Faculty of Economics, University of Tokyo.
    2. Kelemen, József, 2017. "Több piacra épülő webáruház térbeli árversenye [Spatial price competition for a web shop built on several markets]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 612-629.

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    More about this item

    Keywords

    tax competition; cross-border shopping; online retailer; destination principle; origin principle;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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