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International Oligopoly and the Taxation of Commerce with Revenue‐Constrained Governments

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  • ANDREAS HAUFLER
  • MICHAEL PFLÜGER

Abstract

We evaluate the incentives for strategic commodity tax‐setting under destination and origin regimes when competition is imperfect and commodity taxes must be used to finance the government budget. Different cases of international duopoly are compared, where firms compete over quantities or prices and markets are segmented or integrated. In each setting the international spillovers of tax policy are isolated and evaluated at the Pareto‐efficient tax rate. We find that origin‐based commodity taxation leads to a downward competition of tax rates in each of the models analysed, whereas no similarly broad‐based incentives for beggar‐thy‐neighbour policies exist under the destination principle.

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  • Andreas Haufler & Michael Pflüger, 2007. "International Oligopoly and the Taxation of Commerce with Revenue‐Constrained Governments," Economica, London School of Economics and Political Science, vol. 74(295), pages 451-473, August.
    • Handle: RePEc:bla:econom:v:74:y:2007:i:295:p:451-473
    DOI: 10.1111/j.1468-0335.2006.00549.x
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    1. Thisse, Jacques-François & Hamilton, Jonathan & Ottaviano, Gianmarco & Behrens, Kristian, 2004. "Destination- versus Origin-based Commodity Taxation and the Location of Industry," CEPR Discussion Papers 4671, C.E.P.R. Discussion Papers.
    2. Haufler, Andreas & Pflüger, Michael, 2003. "Market structure and the taxation of international trade," Discussion Papers in Economics 106, University of Munich, Department of Economics.
    3. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
    4. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 2008 - 2015 192, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    2. Braun, Sebastian & Spielmann, Christian, 2012. "Wage subsidies and international trade: When does policy coordination pay?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-42.
    3. Ourania Karakosta & Nikos Tsakiris, 2014. "Can tariff and tax reforms deliver welfare improvements under imperfect competition?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(3), pages 315-328, April.
    4. Oliver Krebs & Michael Pflüger, 2018. "How deep is your love? A quantitative spatial analysis of the transatlantic trade partnership," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 171-222, February.
    5. Simone Moriconi & Pierre M. Picard & Skerdilajda Zanaj, 2019. "Commodity taxation and regulatory competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(4), pages 919-965, August.
    6. Gugl, Elisabeth & Zodrow, George R., 2019. "Tax Competition and the Efficiency of “Benefit-Related†Business Taxes," Working Papers 19-006, Rice University, Department of Economics.
    7. Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2010. "Commodity taxation and parallel imports," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 153-162, February.
    8. Moriconi, Simone & Sato, Yasuhiro, 2009. "International commodity taxation in the presence of unemployment," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 939-949, August.
    9. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2015. "Destination vs. Origin-based Commodity Taxation in Large Open Economies with Unemployment," CESifo Working Paper Series 5585, CESifo.
    10. Behrens, Kristian & Hamilton, Jonathan H. & Ottaviano, Gianmarco I.P. & Thisse, Jacques-François, 2009. "Commodity tax competition and industry location under the destination and the origin principle," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 422-433, July.
    11. Elisabeth Gugl & George R. Zodrow, 2019. "Tax competition and the efficiency of “benefit-related” business taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 486-505, June.
    12. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.
    13. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2019. "Destination‐based vs. Origin‐based Commodity Taxation in Large Open Economies with Unemployment," Economica, London School of Economics and Political Science, vol. 86(341), pages 67-86, January.

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