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Tacit Collusion under Destination- and Origin-Based Commodity Taxation

  • Haufler, A.
  • Schjelderup, G.

The paper employs a standard model of dynamic price competition to study how international principles of value-added taxation affect the stability of collusive agreements when producers in an international duopoly agree not to export into each other's home market. If costs of production are zero, international tax differentials reduce support for collusive agreements under the destination, but not under the origin principle. When positive costs of production are introduced, however, the ranking of the two tax principles becomes ambiguous. We also show that tax harmonization - taken to imply an increase in the VAT rate of the low-tax country - increases the likelihood of tacit collusion under both the destination principle and the origin principle.

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Paper provided by Norwegian School of Economics and Business Administration- in its series Papers with number 8/99.

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Length: 31 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:norgee:8/99
Contact details of provider: Postal:
NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, HELLEVEIEN 30, 5035 BERGEN SANDVIKEN NORWAY.

Phone: 5595 9000
Fax: 5595 9100
Web page: http://www.nhh.no/
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