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Tax competition in the presence of environmental spillovers

Fabio Antoniou, Panos Hatzipanayotou, Michael Michael and Nikos Tsakiris ()

International Tax and Public Finance, 2022, vol. 29, issue 3, No 3, 600-626

Abstract: Abstract This paper examines the efficiency of destination-and origin-based consumption taxes, in the presence of consumption generated perfect cross-border pollution spillovers, when tax revenue either finances public pollution abatement or it is lump-sum distributed. When consumption tax revenue finances the provision of public pollution abatement and regions have identical and quasi-linear preferences then, the non-cooperative equilibrium origin-based consumption taxes are efficient, while the destination-based consumption taxes are inefficiently low. When, however, consumption tax revenue is lump-sum distributed, then, the destination-based tax principle leads to inefficiently low taxes, while the origin-based tax principle leads either to inefficiently high or low taxes.

Keywords: Environmental spillovers; Efficiency; Tax competition; Tax principles (search for similar items in EconPapers)
JEL-codes: H21 H23 H41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10797-021-09680-3

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