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Does E-Commerce Ease or Intensify Tax Competition? Destination Principle vs. Origin Principle

Hiroshi Aiura and Hikaru Ogawa
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Hiroshi Aiura: Department of Economics, Nanzan University
Hikaru Ogawa: Faculty of Economics, The University of Tokyo

No CIRJE-F-1169, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: By constructing a commodity tax competition model with product differentiation, this paperstudies the relationship between the development of e-commerce and the intensity of tax competitionunder two different tax principles to be applied to e-commerce: the destination principle and the originprinciple. Our main ndings are as follows: (i) tax competition between two symmetric countriesunder the destination principle is more intense than tax competition under the origin principle, and(ii) the development of e-commerce raises the tax rate under the origin principle, but lowers it underthe destination principle. An analysis of tax competition among asymmetric countries was alsoconducted. The nding was that in some cases, the development of e-commerce has changed the taxrate set by large and small countries in opposite directions.

Pages: 21 pages
Date: 2021-05
New Economics Papers: this item is included in nep-pbe
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