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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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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14 citations in Scopus
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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