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Commodity Taxation and Parallel Imports

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  • Schmitt, Nicolas
  • Raimondos, Pascalis

Abstract

We examine the interaction between commodity taxes and parallel imports in a simple two-country model with imperfect competition. While governments determine non-cooperatively their commodity tax rate, the volume of parallel imports is determined endogenously by the retailing sector. We compare the positive and normative implications of having commodity taxes based on destination or origin principle. Origin taxes are shown to have very attractive properties: they lead to lower levels of optimal taxes, they converge as parallel imports increase (while destination taxes diverge), and they lead to higher welfare levels.

Suggested Citation

  • Schmitt, Nicolas & Raimondos, Pascalis, 2007. "Commodity Taxation and Parallel Imports," CEPR Discussion Papers 6580, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6580
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    Cited by:

    1. is not listed on IDEAS
    2. Arijit Mukherjee & Laixun Zhao, 2012. "Profitable parallel trade in unionized markets," Journal of Economics, Springer, vol. 107(3), pages 267-276, November.
    3. Acharyya, Rajat & García-Alonso, María D.C., 2012. "Income based price subsidies and parallel imports," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 25-41.
    4. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.

    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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