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Tax Principles and Tariff‐Tax Reforms under International Oligopoly
Author(s) -
FUJIWARA KENJI
Publication year - 2016
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12140
Subject(s) - economics , tariff , commodity , welfare , duopoly , international economics , oligopoly , ad valorem tax , ranking (information retrieval) , microeconomics , monetary economics , tax reform , public economics , market economy , machine learning , computer science
In a two‐country duopoly model, this paper compares destination‐ and origin‐based commodity taxes adjusted to tariff reductions so that the world price and foreign welfare remain unaltered. We first find that this tariff‐tax reform reduces domestic welfare under the destination principle while the opposite holds under the origin principle. Then, it is shown that this ranking is reversed if exports are taxed. In short, which is preferable between destination and origin taxes depends on the tax principle and which between imports and exports are taxed.