Sales Tax: Specific or Ad Valorem Tax for a Non-renewable Resource?

Nguyen Manh Hung () and Nguyen Van Quyen ()
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Nguyen Manh Hung: Département économique, Université Laval, Quebec, Canada G1W 4R9
Nguyen Van Quyen: Département de science économique, Université d'Ottawa, 55 Laurier E, Ottawa, Ontario, Canada K1N 6N5

No 3, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: This paper shows that for a time-independent specific tax and a time-independent ad valorem tax that induce the same competitive equilibrium in the Hotelling model of resource extraction, the ad valorem tax yields a higher level of discounted tax revenues than the specific tax. Moreover, given the same level of discounted tax revenues, the ad valorem tax also yields a higher level of social welfare. Finally, for the time-dependent schedules of optimal ad valorem tax and optimal specific tax, we show that when appropriately set, they are equivalent in implementing the dynamic social optimum and providing the same discounted tax revenues.

Keywords: Non-renewable Resources; Ad Valorem Tax; Specific Tax; Welfare (search for similar items in EconPapers)
JEL-codes: H21 Q30 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2009
New Economics Papers: this item is included in nep-ene, nep-env and nep-pub
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Citations: View citations in EconPapers (6)

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