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Tacit Collusion under Destination- and Origin-Based Commodity Taxation

Andreas Haufler () and Guttorm Schjelderup ()

Working Papers from Norwegian School of Economics and Business Administration-

Abstract: The paper employs a standard model of dynamic price competition to study how international principles of value-added taxation affect the stability of collusive agreements when producers in an international duopoly agree not to export into each other's home market. If costs of production are zero, international tax differentials reduce support for collusive agreements under the destination, but not under the origin principle. When positive costs of production are introduced, however, the ranking of the two tax principles becomes ambiguous. We also show that tax harmonization - taken to imply an increase in the VAT rate of the low-tax country - increases the likelihood of tacit collusion under both the destination principle and the origin principle.

Keywords: MARKET STRUCTURE; TAXATION; GOVERNMENT (search for similar items in EconPapers)
JEL-codes: H7 L1 (search for similar items in EconPapers)
Date: 1999
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Working Paper: Tacit Collusion under Destination- and Origin-Based Commodity Taxation (2000) Downloads
Working Paper: Tacit Collusion under Destination - and Origin-Based Commodity Taxation (1999) Downloads
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