IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_518.html
   My bibliography  Save this paper

Tax Principles and Tax Harmonization under Imperfect Competition: A Cautionary Example

Author

Listed:
  • Michael Keen
  • Sajal Lahiri
  • Pascalis Raimondos

Abstract

This paper shows that under imperfect competition the welfare effects of indirect tax harmonization may depend crucially on whether taxes are levied by the destination or the origin principle. In a standard model of imperfect competition, while harmonization always makes at least one country better off, and may be Pareto-improving, when taxes are levied under the destination principle (which currently applies in the European Union), harmonization of origin-based taxes (as recently proposed by the European Commission) is certain to be Pareto-worsening when the preferences in the two countries are identical, and is likely to be so even when they differ.

Suggested Citation

  • Michael Keen & Sajal Lahiri & Pascalis Raimondos, 2001. "Tax Principles and Tax Harmonization under Imperfect Competition: A Cautionary Example," CESifo Working Paper Series 518, CESifo.
    • Handle: RePEc:ces:ceswps:_518
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp518.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lopez-Garcia, Miguel-Angel, 1998. "On welfare and revenue effects of indirect tax harmonization," Economics Letters, Elsevier, vol. 60(2), pages 185-193, August.
    2. Lockwood, Ben, 1997. "Can international commodity tax harmonisation be Pareto-improving when governments supply public goods?," Journal of International Economics, Elsevier, vol. 43(3-4), pages 387-408, November.
    3. Keen, Michael & Lahiri, Sajal, 1998. "The comparison between destination and origin principles under imperfect competition," Journal of International Economics, Elsevier, vol. 45(2), pages 323-350, August.
    4. Haufler, Andreas & Schjelderup, Guttorm & Stähler, Frank, 2000. "Commodity Taxation and international Trade in Imperfect Markets," CoFE Discussion Papers 00/32, University of Konstanz, Center of Finance and Econometrics (CoFE).
    5. Keen, Michael & Lahiri, Sajal, 1993. "Domestic tax reform and international oligopoly," Journal of Public Economics, Elsevier, vol. 51(1), pages 55-74, May.
    6. Delipalla, Sophia, 1997. "Commodity tax harmonisation and public goods," Journal of Public Economics, Elsevier, vol. 63(3), pages 447-466, February.
    7. Lockwood, Ben, 2001. "Tax competition and tax co-ordination under destination and origin principles: a synthesis," Journal of Public Economics, Elsevier, vol. 81(2), pages 279-319, August.
    8. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
    9. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(1), pages 5-24, February.
    10. Jones, Ronald W, 1985. "Income Effects and Paradoxes in the Theory of International Trade," Economic Journal, Royal Economic Society, vol. 95(378), pages 330-344, June.
    11. Miguel-Angel Lopez-Garcia, 1996. "The origin principle and the welfare gains from indirect tax harmonization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(1), pages 83-93, January.
    12. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1998. "Public good provision and the welfare effects of indirect tax harmonisation," Journal of Public Economics, Elsevier, vol. 67(2), pages 253-267, February.
    13. Keen, Michael, 1987. "Welfare effects of commodity tax harmonisation," Journal of Public Economics, Elsevier, vol. 33(1), pages 107-114, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kenji Fujiwara, 2016. "Tax Principles and Tariff-Tax Reforms under International Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 84-98, February.
    2. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2009. "Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?," CESifo Working Paper Series 2668, CESifo.
    3. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 577-600, March.
    4. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2014. "Indirect tax harmonization and global public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 29-49, February.
    5. Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2010. "Commodity taxation and parallel imports," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 153-162, February.
    6. Agrawal, David R. & Mardan, Mohammed, 2019. "Will destination-based taxes be fully exploited when available? An application to the U.S. commodity tax system," Journal of Public Economics, Elsevier, vol. 169(C), pages 128-143.
    7. 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.
    8. Behrens, Kristian & Hamilton, Jonathan H. & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Commodity tax harmonization and the location of industry," Journal of International Economics, Elsevier, vol. 72(2), pages 271-291, July.
    9. Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2007. "Imperfect competition, indirect tax harmonization and public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 135-149, April.
    10. David R. Agrawal & William F. Fox, 2017. "Taxes in an e-commerce generation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 903-926, September.
    11. Kenji Fujiwara, 2015. "Tax Principles and Tariff-Tax Reforms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(3), pages 360-370, September.
    12. 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.
    13. Fujiwara, Kenji, 2014. "Pareto-improving tariff-tax reforms under imperfect competition," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 12-20.
    14. Kenji Fujiwara, 2014. "Tax Principles and Coordination of Trade and Domestic Policies Under Imperfect Competition," Australian Economic Papers, Wiley Blackwell, vol. 53(1-2), pages 29-40, June.
    15. Andreas Haufler & Christian Schulte, 2007. "Merger Policy and Tax Competition," Working Papers 035, Bavarian Graduate Program in Economics (BGPE).
    16. Sajal Lahiri & Peri Silva, 2016. "Potential Pareto-Improving Move Toward Most Favored Nation Tariffs," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1086-1104, April.
    17. Christos Kotsogiannis & Miguel‐Angel Lopez‐Garcia, 2021. "On commodity tax harmonization and public goods provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1220-1227, December.
    18. 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.
    19. Michele Santoni, 2017. "Protective Excise Taxation," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 421-445, December.
    20. Benjamin Harbolt, 2019. "Tax Avoidance through E-Commerce and Cross-Border Shopping," CESifo Working Paper Series 7814, CESifo.
    21. Krishanu Karmakar & Jorge Martinez-Vazquez, 2014. "Fiscal Competition versus Fiscal Harmonization: A Review of the Arguments," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1431, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    22. Andreas Haufler & Christian Schulte, 2011. "Merger policy and tax competition: the role of foreign firm ownership," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(2), pages 121-145, April.
    23. 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.
    24. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2019. "On the Principles of Commodity Taxation under Interregional Externalities," University of Cyprus Working Papers in Economics 03-2019, University of Cyprus Department of Economics.
    25. Miguel Angel López-García, 2004. "Welfare, Revenue and Indirect Tax Harmonization under the Origin Principle," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 9-25, marzo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haufler, Andreas & Schjelderup, Guttorm, 2004. "Tacit collusion and international commodity taxation," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 577-600, March.
    2. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2014. "Indirect tax harmonization and global public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 29-49, February.
    3. Lockwood, Ben, 2001. "Tax competition and tax co-ordination under destination and origin principles: a synthesis," Journal of Public Economics, Elsevier, vol. 81(2), pages 279-319, August.
    4. Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2007. "Imperfect competition, indirect tax harmonization and public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 135-149, April.
    5. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2009. "Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?," CESifo Working Paper Series 2668, CESifo.
    6. Miguel Angel López-García, 2004. "Welfare, Revenue and Indirect Tax Harmonization under the Origin Principle," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 9-25, marzo.
    7. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1998. "Public good provision and the welfare effects of indirect tax harmonisation," Journal of Public Economics, Elsevier, vol. 67(2), pages 253-267, February.
    8. Lucas, Vander, 2001. "Tax harmonisation and the origin principle," Economics Letters, Elsevier, vol. 71(1), pages 111-115, April.
    9. 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.
    10. Sajal Lahiri & Peri Silva, 2016. "Potential Pareto-Improving Move Toward Most Favored Nation Tariffs," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1086-1104, April.
    11. Lenka Janíčková, 2012. "Tax Harmonization - the Possible Way out of the Crisis? [Daňová harmonizace - možná cesta z krize?]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2012(1), pages 64-81.
    12. Pascal Belan & Stéphane Gauthier, 2009. "Commodity Tax Competition with Constrained Taxes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 653-665, August.
    13. Christos Kotsogiannis & Miguel‐Angel Lopez‐Garcia, 2021. "On commodity tax harmonization and public goods provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1220-1227, December.
    14. Pascal Belan & Stéphane Gauthier, 2008. "Commodity Tax Competition and the VAT Base in the European Union," Working Papers 2008-17, Center for Research in Economics and Statistics.
    15. Odekerken-Schroder, G.J. & de Wulf, K. & Reynolds, K.E., 2000. "Relationship marketing effectiveness in retailing: a contingency approach," Research Memorandum 036, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    16. Lopez-Garcia, Miguel-Angel, 1998. "On welfare and revenue effects of indirect tax harmonization," Economics Letters, Elsevier, vol. 60(2), pages 185-193, August.
    17. Ayoki, Milton, 2017. "Estimating the Revenue Impacts of Tax Harmonisation," MPRA Paper 83548, University Library of Munich, Germany.
    18. Kenji Fujiwara, 2016. "Tax Principles and Tariff-Tax Reforms under International Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 84-98, February.
    19. Andreas Haufler & Michael Pflüger, 2004. "International Commodity Taxation under Monopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 445-470, August.
    20. Delipalla, Sophia, 1997. "Commodity tax harmonisation and public goods," Journal of Public Economics, Elsevier, vol. 63(3), pages 447-466, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.