Tax principles and tax harmonization under imperfect competition: A cautionary example

Keen, M., Lahiri, S., & Raimondos-Moller, Pascalis (2002) Tax principles and tax harmonization under imperfect competition: A cautionary example. European Economic Review, 46(8), pp. 1559-1568.

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Abstract

This paper shows that under imperfect competition, the welfare effects of indirect tax harmonization may depend crucially on whether taxes are levied by the destination or the origin principle. In a standard model of imperfect competition, while harmonization always makes at least one country better off, and may be Pareto-improving, when taxes are levied under the destination principle (which currently applies in the European Union), harmonization of origin-based taxes (as recently proposed by the European Commission) is certain to be Pareto-worsening when the preferences in the two countries are identical, and is likely to be so even when they differ.

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13 citations in Web of Science®

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ID Code: 94039
Item Type: Journal Article
Refereed: Yes
DOI: 10.1016/S0014-2921(01)00189-1
ISSN: 0014-2921
Deposited On: 22 Mar 2016 03:26
Last Modified: 22 Mar 2016 04:13

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