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Cross-border or online: Tax competition with mobile consumers under destination and origin principle

Listed author(s):
  • Birg, Laura

This paper studies the effect of an online retailer on spatial tax competition with mobile consumers. If taxation for online purchases follows the destination principle, the entry of the online retailer mitigates tax competition; if taxation for online purchases follows the origin principle, the entry of the online retailer enhances tax competition. Lower cost of online shopping enhances the effect of the online retailer on tax competition, limited internet access decreases the effect of the online retailer on tax competition. For sufficiently low cost of online shopping, welfare in the country where the online retailer is located is higher under the origin principle and welfare in the other country is higher under the destination principle. Total welfare is higher under the destination principle.

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File URL: https://www.econstor.eu/bitstream/10419/125566/1/845121294.pdf
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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 265.

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Date of creation: 2015
Handle: RePEc:zbw:cegedp:265
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Web page: http://www.cege.wiso.uni-goettingen.de/

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  1. Liran Einav & Dan Knoepfle & Jonathan Levin & Neel Sundaresan, 2014. "Sales Taxes and Internet Commerce," American Economic Review, American Economic Association, vol. 104(1), pages 1-26, January.
  2. James Alm & Mikhail I. Melnik, 2005. "Sales Taxes and the Decision to Purchase Online," Public Finance Review, , vol. 33(2), pages 184-212, March.
  3. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 135-148, May.
  4. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 84-90.
  5. Nielsen, Soren Bo, 2001. " A Simple Model of Commodity Taxation and Cross-Border Shopping," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 599-623, December.
  6. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters,in: E-commerce, pages 541-558 National Bureau of Economic Research, Inc.
  7. Nielsen, Soren Bo, 2002. "Cross-border shopping from small to large countries," Economics Letters, Elsevier, vol. 77(3), pages 309-313, November.
  8. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
  9. Mark Lijesen, 2013. "Hotelling’s webshop," Journal of Economics, Springer, vol. 109(2), pages 193-200, June.
  10. Bo Cowgill & Cosmina Dorobantu & Bertin Martens, 2013. "Does online trade live up to the promise of a borderless world? Evidence from the EU Digital Single Market," JRC Working Papers on Digital Economy 2013-08, Joint Research Centre (Seville site).
  11. Ballard, Charles L. & Lee, Jaimin, 2007. "Internet Purchases, Cross-Border Shopping, and Sales Taxes," National Tax Journal, National Tax Association, vol. 60(4), pages 711-725, December.
  12. Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.
  13. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
  14. repec:kap:iaecre:v:16:y:2010:i:2:p:135-148 is not listed on IDEAS
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