Preferential Taxation of E-Commerce: Imperfectly Competitive Retail Markets and Trade Costs

Bo Sandemann Rasmussen ()
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Bo Sandemann Rasmussen: Department of Economics, University of Aarhus, Denmark, Postal: 8000 Aarhus C, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: E-commerce in physical goods enhances the degree of product market competition but leads also to higher trading costs as goods bought through the internet are shipped individually. Do these features of e-commerce support a case for granting preferential tax treatment to online shopping? This is investigated using a model with a domestic monopolistic retailer and foreign competitive producers that can either deliver a physical good to the retailer (ordinary trade) or directly to domestic consumers (e-commerce). Although it is possible to construct cases of strictly positive welfare effects the general result is that granting tax preferences to e-commerce will have ambiguous welfare consequences.

Keywords: E-commerce; imperfect competition; pro-competitive gains; trade diversion; commodity taxation; physical goods; trade costs (search for similar items in EconPapers)
JEL-codes: F13 H25 L12 (search for similar items in EconPapers)
Pages: 29
Date: 2004-09-21
New Economics Papers: this item is included in nep-acc, nep-com, nep-net and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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