Multi-tier tax competition on Gasoline

Marie-Laure Breuillé () and Emmanuelle Taugourdeau
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Marie-Laure Breuillé: CESAER, INRA.

No 2019-23, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper analyzes the fiscal interactions arising from gasoline taxation in a federation. We adopt a general theoretical model for studying simultaneous vertical and horizontal tax competition by i) introducing a specific monetary cost of refueling ii) assuming that the price of gasoline is affected by either excise taxes (regional and federal) and the VAT rate, ii) considering elastic demand for gasoline. We show that at the symmetric equilibrium, horizontal taxes are strategic complements but vertical taxes are strategic may be substitutes. Moreover, horizontal excise taxes are strategic substitutes with VAT whereas the result is unclear for the reaction between regional and federal excise taxes. Finally, we show that the tax reaction functions and thus the equilibria crucially differ according to the pattern of decision-making (social planner, Nash or defederalized leadership).

Keywords: Fiscal Federalism; Gasoline Taxation; Horizontal and Vertical Tax Interactions. (search for similar items in EconPapers)
JEL-codes: E62 H7 Q48 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-11-19
New Economics Papers: this item is included in nep-gth, nep-mac, nep-ore, nep-pbe and nep-pub
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