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Tacit Collusion under Destination - and Origin-Based Commodity Taxation

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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File URL: http://cofe.uni-konstanz.de/Papers/dp99_17.pdf
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Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 99-17.

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Length: 31 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:knz:cofedp:9917
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  1. Jürgen Meckl, 1996. "Market power of firms and exchange-rate fluctuations," Journal of Economics, Springer, vol. 63(1), pages 57-77, February.
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  4. Lommerund, K.E. & Sorgard, L., 1998. "Trade Liberalization and Cartel Stability," Norway; Department of Economics, University of Bergen 0198, Department of Economics, University of Bergen.
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  9. Pinto, Brian, 1986. "Repeated games and the reciprocal dumping model of trade," Journal of International Economics, Elsevier, vol. 20(3-4), pages 357-366, May.
  10. Julio J. Rotemberg & Garth Saloner, 1989. "Tariffs vs Quotas with Implicit Collusion," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 237-44, May.
  11. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
  12. Smith, Alasdair & Venables, Anthony J, 1988. "Completing the Internal Market in the European Community: Some Industry Simulations," CEPR Discussion Papers 233, C.E.P.R. Discussion Papers.
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  17. Michael Keen and Sajal Lahiri, . "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 424, University of Essex, Department of Economics.
  18. Siebert, Horst & Koop, Michael J, 1993. "Institutional Competition versus Centralization: Quo Vadis Europe?," Oxford Review of Economic Policy, Oxford University Press, vol. 9(1), pages 15-30, Spring.
  19. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
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  22. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  23. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer, vol. 5(3), pages 399-428, July.
  24. Steen, Frode & Sorgard, Lars, 1999. "Semicollusion in the Norwegian cement market," European Economic Review, Elsevier, vol. 43(9), pages 1775-1796, October.
  25. Scherer, Frederic Michael, 1996. "International trade and competition policy," ZEW Discussion Papers 96-18, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  26. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
  27. Margaret E. Slade, 1995. "Empirical Games: The Oligopoly Case," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 368-402, May.
  28. Bernd Genser & Andreas Haufler & Peter Birch Soerensen, . "Indirect Taxation in an Integrated Europe. Is there a Way of Avoiding Trade Distortions Without Sacrificing National Tax Autonomy?," EPRU Working Paper Series 93-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  29. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
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