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Indirect Tax Distortions in a Europe of Shopkeepers

Author

Listed:
  • John FitzGerald

    (Economic and Social Research Institute (ESRI))

  • Justin Johnston

    (Economic and Social Research Institute (ESRI))

  • James Williams

    (Economic and Social Research Institute (ESRI))

Abstract

The changed circumstances of the EU after 1992 have a given rise to concern about possible indirect tax competition and related economic distortions. This paper develops a model, incorporating both a production and a retail sector, to examine the effects of different VAT regimes. This model is applied to data on consumer behaviour in the proximity of the Ireland-UK and the Denmark-German borders showing that the potential size of ?border? areas, where distortion may be expected, is relatively small. The paper suggests that there are very limited incentives for governments to act strategically in choosing their indirect tax rates.

Suggested Citation

  • John FitzGerald & Justin Johnston & James Williams, 1995. "Indirect Tax Distortions in a Europe of Shopkeepers," Papers WP056, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp056
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    File URL: http://www.esri.ie/pubs/WP056.pdf
    File Function: First version, 1995
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    References listed on IDEAS

    as
    1. Cnossen, Sijbren, 1990. "The case for tax diversity in the European community," European Economic Review, Elsevier, vol. 34(2-3), pages 471-479, May.
    2. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    3. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    4. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
    5. Berglas, Eitan, 1981. "Harmonization of commodity taxes : Destination, origin and restricted origin principles," Journal of Public Economics, Elsevier, vol. 16(3), pages 377-387, December.
    6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    7. FitzGerald, John & Quinn, T. P. & Whelan, Brendan J. & Williams, J. A., 1988. "An Analysis of Cross-Border Shopping," Research Series, Economic and Social Research Institute (ESRI), number GRS137.
    8. Bode, Eckhardt & Krieger-Boden, Christiane & Lammers, Konrad, 1994. "Cross-border activities, taxation and the European single market," Open Access Publications from Kiel Institute for the World Economy 799, Kiel Institute for the World Economy (IfW).
    9. Trandel, Gregory A., 1992. "Evading the use tax on cross-border sales : Pricing and welfare effects," Journal of Public Economics, Elsevier, vol. 49(3), pages 313-331, December.
    10. Lockwood, Ben & Meza, David & de Myles, Gareth D, 1994. " The Equivalence between Destination and Non-reciprocal Restricted Origin Tax Regimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 311-328.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Bernd Genser & Andreas Haufler, 1996. "Tax competition, tax coordination and tax harmonization: The effects of EMU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(1), pages 59-89, February.
    2. Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Introduction," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 1, pages 1-9 Economic and Social Research Institute (ESRI).
    3. FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Overall Macroeconomic Assessment," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 6, pages 143-169 Economic and Social Research Institute (ESRI).
    4. Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo Group Munich.
    5. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), number PRS28.
    6. John FitzGerald & Fergal Shortall, 1998. "Exchange Rate Changes and the Transmission of Inflation," Papers WP096, Economic and Social Research Institute (ESRI).
    7. Keuschnigg, Christian & Loretz, Simon & Winner, Hannes, 2014. "Tax Competition and Tax Coordination in the European Union: A Survey," Economics Working Paper Series 1427, University of St. Gallen, School of Economics and Political Science.
    8. Cnossen,Sijbren, 2002. "Tax policy in the european union, A review of issues and options," Research Memorandum 023, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    9. Rizzo, Leonzio, 2000. "Equalisation and Fiscal Competition," MPRA Paper 5335, University Library of Munich, Germany.
    10. Morgenroth, Edgar & FitzGerald, John & FitzGerald, John, 2006. "Summary and Conclusions," Book Chapters,in: Morgenroth, Edgar (ed.), Ex-Ante Evaluation of the Investment Priorities for the National Development Plan 2007-2013, chapter 24, pages 317-333 Economic and Social Research Institute (ESRI).
      • Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Summary and Conclusions," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 12, pages 339-352 Economic and Social Research Institute (ESRI).
    11. Duggan, Delma & FitzGerald, John & Johnston, Justin & Kavanagh, Ella & FitzGerald, John & Honohan, Patrick, 1996. "Macroeconomic Response to Shocks," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 5, pages 105-142 Economic and Social Research Institute (ESRI).
    12. Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Adapting to Regime Change," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, pages 10-36 Economic and Social Research Institute (ESRI).
    13. Hansen, Mads J. N. G., 1999. "Cross-border Shopping and the Environment," ERSA conference papers ersa99pa206, European Regional Science Association.
    14. Kelly, Jane & FitzGerald, John & Honohan, Patrick, 1996. "The Tourism Sector," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 11, pages 321-338 Economic and Social Research Institute (ESRI).
    15. Rizzo, Leonzio, 2005. "Interaction between Vertical and Horizontal tax Competition: Theory and Evidence," MPRA Paper 5334, University Library of Munich, Germany.
    16. Duggan, Delma & FitzGerald, John & Johnston, Justin & Kelly, Jane & FitzGerald, John & Honohan, Patrick, 1996. "The Macroeconomy in Stable Conditions," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, pages 50-86 Economic and Social Research Institute (ESRI).
    17. Leonzio Rizzo, 2008. "Local government responsiveness to federal transfers: theory and evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(3), pages 316-337, June.
    18. Leonzio Rizzo, 2006. "Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici," Economia politica, Società editrice il Mulino, issue 1, pages 89-120.
    19. Baker, Terence J. & Duffy, David & Duggan, Delma & FitzGerald, John & Honohan, Patrick, 1996. "The Manufacturing Sector," Book Chapters,in: Baker, Terence J. (ed.), Economic Implications for Ireland of EMU, chapter 7, pages 174-221 Economic and Social Research Institute (ESRI).

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