 VAT versus the turnover tax with non-competitive firmsArindam Das-Gupta ()
Working Papers from National Institute of Public Finance and Policy Abstract: The VAT is compared to a turnover tax (TT) given monopoly final goods and intermediate goods firms interacting strategically. Linear demands and constant costs are assumed. Via examples it is shown that for both "Cournot" and "Stackelberg" games, a revenue neutral VAT may not exist to a given turnover tax; and the TT can dominate the VAT simultaneously in welfare, revenue and output terms. In other examples it is shown that the VAT dominating the TT by all three indicators is also possible. It is also shown that outcomes are identical to the "Cournot" game when the consumer goods firm is the strategic leader. When the intermediate goods firm is the leader, intermediate price distortion is lower and welfare higher than in the "Cournot" game under both taxes; and the output neutral VAT rate to any feasible TT rate is higher than in the "Cournot" game. Keywords: VAT; Retail sales tax; Turnover tax; Welfare; Tax revenue; Cournot; Stackelberg (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:04/21 Access Statistics for this paper More papers in Working Papers from National Institute of Public Finance and Policy |
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