On the optimal tax policy mix when consumers and firms are imperfectly mobile

Arbeitspapier

An optimal taxation approach is employed to discuss the interaction between factor and commodity taxes for a small open economy when both profit-earning firms and domestic consumers are imperfectly mobile internationally. In this framework, we demonstrate two main results: first, a destination-based commodity tax dominates an origin-based VAT from an efficiency perspective since the first is an independent instrument in the presence of non-wage income, whereas the latter can be duplicated by an appropriate combination of wage and (cash-flow) profit taxation. Second, with mobility costs for firms the optimal profit tax is positive even if the location of firms imposes no social costs on the small country. Simulation results show how the optimal mix of wage, profit and consumption taxes depends on key model parameters.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge - Serie II ; No. 330

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Business Taxes and Subsidies including sales and value-added (VAT) ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects ; Real Estate Markets, Spatial Production Analysis, and Firm Location: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Genser, Bernd ; Haufler, Andreas
• Event: Veröffentlichung
• (who): Universität Konstanz, Sonderforschungsbereich 178 - Internationalisierung der Wirtschaft
• (where): Konstanz
• (when): 1997

Further information

• Handle: http://hdl.handle.net/10419/101675
• Last update: 10.03.2025, 11:42 AM CET