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Does e-commerce ease or intensify tax competition? Destination principle versus origin principle

Author

Listed:
  • Hiroshi Aiura

    (Nanzan University)

  • Hikaru Ogawa

    (University of Tokyo)

Abstract

This study examines the relationship between e-commerce development and the intensity of commodity tax competition under two tax principles for goods purchased online: the destination principle and the origin principle. The main findings are as follows: Given that origin-based tax is applied to purchases made in brick-and-mortar stores, (i) tax competition under destination-based taxation on e-commerce is more intense than tax competition under origin-based taxation; and (ii) the expansion of the online market intensifies destination-based tax competition while easing origin-based tax competition. The main factor leading to the results is that replacing the choice of “where to purchase” goods, consumers will have a new choice of “how to purchase” when online purchasing becomes available, and destination-based taxation distorts the latter choice, while origin-based taxation is neutral.

Suggested Citation

  • Hiroshi Aiura & Hikaru Ogawa, 2024. "Does e-commerce ease or intensify tax competition? Destination principle versus origin principle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 702-735, June.
    • Handle: RePEc:kap:itaxpf:v:31:y:2024:i:3:d:10.1007_s10797-023-09796-8
    DOI: 10.1007/s10797-023-09796-8
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Tax competition; E-commerce; Tax principles;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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