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Sales Tax: Specific or Ad Valorem Tax for a Non-renewable Resource?

Author

Listed:
  • Nguyen Manh Hung

    (Département économique, Université Laval, Quebec, Canada G1W 4R9)

  • Nguyen Van Quyen

    (Département de science économique, Université d'Ottawa, 55 Laurier E, Ottawa, Ontario, Canada K1N 6N5)

Abstract

This paper shows that for a time-independent specific tax and a time-independent ad valorem tax that induce the same competitive equilibrium in the Hotelling model of resource extraction, the ad valorem tax yields a higher level of discounted tax revenues than the specific tax. Moreover, given the same level of discounted tax revenues, the ad valorem tax also yields a higher level of social welfare. Finally, for the time-dependent schedules of optimal ad valorem tax and optimal specific tax, we show that when appropriately set, they are equivalent in implementing the dynamic social optimum and providing the same discounted tax revenues.

Suggested Citation

  • Nguyen Manh Hung & Nguyen Van Quyen, 2009. "Sales Tax: Specific or Ad Valorem Tax for a Non-renewable Resource?," Working Papers 03, Development and Policies Research Center (DEPOCEN), Vietnam.
    • Handle: RePEc:dpc:wpaper:0309
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    Citations

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    Cited by:

    1. Wang, Jie & Liao, Xianchun & Yu, Yue, 2022. "The examination of resource tax reform facilitating firms’ green innovation in resource-related industry in China," Resources Policy, Elsevier, vol. 79(C).
    2. Yanhui Yin & Bowen Yang, 2023. "Environmental Protection or Development? Multiple Policy Effects Evaluation of the Resource Tax Collection Reform for Iron Ore Enterprises in China," IJERPH, MDPI, vol. 20(5), pages 1-15, February.
    3. Gao, Zhiyuan & Zhang, Yahui & Li, Lianqing & Hao, Yu, 2024. "Will resource tax reform raise green total factor productivity levels in cities? Evidence from 114 resource-based cities in China," Resources Policy, Elsevier, vol. 88(C).
    4. Zhong, Meirui & Liu, Qing & Zeng, Anqi & Huang, Jianbai, 2018. "An effects analysis of China's metal mineral resource tax reform: A heterogeneous dynamic multi-regional CGE appraisal," Resources Policy, Elsevier, vol. 58(C), pages 303-313.
    5. Tang, Ling & Shi, Jiarui & Yu, Lean & Bao, Qin, 2017. "Economic and environmental influences of coal resource tax in China: A dynamic computable general equilibrium approach," Resources, Conservation & Recycling, Elsevier, vol. 117(PA), pages 34-44.
    6. Li, Yuan & Zhou, You & Yi, Bo-Wen & Wang, Ya, 2021. "Impacts of the coal resource tax on the electric power industry in China: A multi-regional comprehensive analysis," Resources Policy, Elsevier, vol. 70(C).

    More about this item

    Keywords

    Non-renewable Resources; Ad Valorem Tax; Specific Tax; Welfare;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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