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Microeconomic Consequences of Exemptions from Value Added Taxation – The Case of Deutsche Post


  • Thomas Wein

    () (Institute of Economics, Leuphana University of Lüneburg, Germany)


The exemption for Value Added Taxation (VAT) can be used to pursue distributive objectives. Goods like food, housing, medicine, or infrastructure services (water, telecommunication, postal) are very often partially or totally exempted from VAT. The exemption of infrastructure services had been frequently combined with market entry restrictions. Both instruments should assure the fulfilling of the universal service obligation (USO). VAT-exemption leads to two problems, at least: (i) the expectable financial gain, which can be achieved by the exempted firm, is unpredictable, and (ii) the welfare consequences depend on the prevailing type of market structure (competition, monopoly with or without price discrimination, or dominant firm). The VAT-exemption for German postal services can be seen as an outstanding case study to show the typical consequences. Because of empirical references for intensive use of price discrimination by Deutsche Post AG and strong arguments of Deutsche Post AG as a dominant firm welfare could be increased by abolishing VAT-exemption without abandoning USO.

Suggested Citation

  • Thomas Wein, 2011. "Microeconomic Consequences of Exemptions from Value Added Taxation – The Case of Deutsche Post," Working Paper Series in Economics 199, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:199

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    References listed on IDEAS

    1. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
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    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L87 - Industrial Organization - - Industry Studies: Services - - - Postal and Delivery Services
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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