Barriers to trade and imperfect competition: The choice of commodity tax base

Andreas Haufler, Guttorm Schjelderup and Frank Stähler

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Recent work has started to analyze the choice of international commodity tax base under conditions of imperfect competition. This paper focuses on the effects of changing levels of trade barriers in a model where firms engage in duopoly competition and governments set commodity taxes non-cooperatively. It is shown that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high, but the ranking of the two tax bases is reversed for low levels of trade costs. We conclude that the case for origin-based commodity taxes becomes stronger when barriers to trade fall.

Date: 2005
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Published in International Tax and Public Finance 3 12(2005): pp. 281-300

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Journal Article: Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20414

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