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Tax Principles and Coordination of Trade and Domestic Policies Under Imperfect Competition
Author(s) -
Fujiwara Kenji
Publication year - 2014
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12019
Subject(s) - tax competition , economics , ad valorem tax , imperfect competition , consumption tax , value added tax , international economics , tax reform , indirect tax , context (archaeology) , commodity , consumption (sociology) , monopoly , microeconomics , public economics , market economy , paleontology , social science , sociology , biology
We construct an exporting monopoly model to compare destination‐ and origin‐based commodity taxes in a context of a trade and domestic tax reform. We show that an export tax reduction and a change in destination (resp. origin) tax that fix the world price is strictly P areto‐improving (resp. deteriorating), which holds whether markets are integrated or segmented. This result may provide a new rationale for preferring the destination‐based consumption tax to the origin‐based production tax that has been discussed in the literature of tax harmonisation and tax competition.