Indirect Tax Distortions in a Europe of Shopkeepers

John Fitz Gerald (), Justin Johnston and James Williams ()
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John Fitz Gerald: Economic and Social Research Institute (ESRI)
Justin Johnston: Economic and Social Research Institute (ESRI)
James Williams: Economic and Social Research Institute (ESRI)
Authors registered in the RePEc Author Service: John D. Fitzgerald ()

No WP056, Papers from Economic and Social Research Institute (ESRI)

Abstract: The changed circumstances of the EU after 1992 have a given rise to concern about possible indirect tax competition and related economic distortions. This paper develops a model, incorporating both a production and a retail sector, to examine the effects of different VAT regimes. This model is applied to data on consumer behaviour in the proximity of the Ireland-UK and the Denmark-German borders showing that the potential size of ?border? areas, where distortion may be expected, is relatively small. The paper suggests that there are very limited incentives for governments to act strategically in choosing their indirect tax rates.

Keywords: VAT regimes; Indirect Tax Distortions; Cross-Border Shopping; Tax Competition (search for similar items in EconPapers)
Date: 1995-01
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