Asymmetric commodity tax competition: Are tax rates always too low?

Arbeitspapier

A widely noticed result by de Crombrugghe and Tulkens (1990) states that asymmetric commodity tax competition always leads to tax rates being too low in both countries, even though there are counteracting tax base and terms of trade effects. This note argues that the result depends crucially on the assumption that welfare in the high-tax region is concave in the tax rate of the low-tax country and shows that this assumption cannot generally be met in the underlying Mintz and Tulkens (1986) model. It is also shown that a tax increase in the low-tax country will hurt the high-tax region when the marginal transaction cost schedule is sufficiently elastic with respect to the level of cross-border shopping.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge - Serie II ; No. 295

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
• Subject: commodity tax competition ; fiscal externalities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haufler, Andreas
• Event: Veröffentlichung
• (who): Universität Konstanz, Sonderforschungsbereich 178 - Internationalisierung der Wirtschaft
• (where): Konstanz
• (when): 1996

Further information

• Handle: http://hdl.handle.net/10419/101748
• Last update: 10.03.2025, 11:46 AM CET