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Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market

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  • Christiansen, Vidar

Abstract

Using a partial equilibrium model, optimality rules for a commodity tax are derived for an economy that is exposed to cross-border shopping. In a competitive market, the conventional inverse elasticity rule is shown to be valid with the qualification that it is the elasticity of domestic rather than total demand that matters. With a foreign monopoly, the inverse elasticity is modified by a tax-shifting effect. When the supplier is a multinational firm, price repercussions abroad should be taken into account. The implications for domestic taxation of the prices and taxes set abroad are also examined. Copyright 1994 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Christiansen, Vidar, 1994. "Cross-Border Shopping and the Optimum Commodity Tax in a Competitive and a Monopoly Market," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 329-341.
    • Handle: RePEc:bla:scandj:v:96:y:1994:i:3:p:329-41
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    Citations

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    Cited by:

    1. Nishaal Gooroochurn, 2009. "Optimal Commodity Taxation in the Presence of Tourists," International Economic Journal, Taylor & Francis Journals, vol. 23(2), pages 197-209.
    2. Andreas Haufler, 1996. "Optimal factor and commodity taxation in a small open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 425-442, July.
    3. Ohsawa, Yoshiaki, 2003. "A spatial tax harmonization model," European Economic Review, Elsevier, vol. 47(3), pages 443-459, June.
    4. Odd E. Nygård & John T. Revesz, 2015. "Optimal indirect taxation and the uniformity debate: A review of theoretical results and empirical contributions," Discussion Papers 809, Statistics Norway, Research Department.
    5. Jørgen Aasness & Odd Erik Nygård, 2009. "Revenue functions and Dupuit curves for indirect taxes with cross-border shopping," Discussion Papers 573, Statistics Norway, Research Department.
    6. John FitzGerald & Justin Johnston & James Williams, 1995. "Indirect Tax Distortions in a Europe of Shopkeepers," Papers WP056, Economic and Social Research Institute (ESRI).
    7. Desiderio Romero-Jordán & Marta Jorge Garc𫑉n鳠 & Santiago Álvarez Garc𨀍, 2013. "The impact of fuel tourism on retailers’ diesel price in Spanish neighbouring regions," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 407-413, February.
    8. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
    9. repec:kap:iaecre:v:16:y:2010:i:2:p:135-148 is not listed on IDEAS
    10. Andreas Haufler, 1996. "Tax coordination with different preferences for public goods: Conflict or harmony of interest?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(1), pages 5-28, January.
    11. Mr. Michael Keen, 2002. "Some International Issues in Commodity Taxation," IMF Working Papers 2002/124, International Monetary Fund.
    12. Ramsey Doug & Thimm Tatanja & Hehn Leonie, 2019. "Cross-border Shopping Tourism: A Switzerland-Germany Case Study," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 9(1), pages 3-17, May.
    13. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 135-148, May.
    14. Odd E. Nygard & John T. Revesz, 2016. "A literature review on optimal indirect taxation and the uniformity debate," Hacienda Pública Española / Review of Public Economics, IEF, vol. 218(3), pages 107-140, September.
    15. Kaisa Kotakorpi, 2009. "Paternalism and Tax Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 125-149, March.
    16. Saša Ranđelović & Milica Bisić, 2021. "Excise duties harmonisation and smoking in a model with cross-border arbitrage," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 507-532, May.
    17. Mr. Montfort Mlachila & Mr. Edgardo Ruggiero & David Corvino, 2016. "Unintended Consequences: Spillovers from Nigeria’s Fuel Pricing Policies to Its Neighbor," IMF Working Papers 2016/017, International Monetary Fund.
    18. Odd Erik Nygård, 2014. "Optimal Commodity Taxes for Norway with Cross-Border Shopping," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 316-342, June.
    19. Kimberley Scharf, 1999. "Scale Economies in Cross-Border Shopping and Commodity Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(1), pages 89-99, February.
    20. Vidar Christiansen, "undated". "Cross-border shopping and tax structure," EPRU Working Paper Series 03-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    21. Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.

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