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Value-added taxation in the EC after 1992: Some applied general equilibrium calculations

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  • Fehr, Hans
  • Rosenberg, Christoph B.
  • Wiegard, Wolfgang

Abstract

This paper examines the quantitative effects of the transitional system of value-added taxation for intra-EC trade after 1992, as recently adopted by the ECOFIN-Council. First, the administration of the current destination principle and the interim solution are described and a mathematical formalization is provided. A short representation of the empirical general equilibrium model featuring seven EC regions and 14 production sectors follows. Finally, the effects of a switch to the transitional system are examined theoretically and by using policy simulations. When decomposing welfare effects, international tax revenue shifts prove to dominate, while substitution effects have relatively little influence on economic welfare. A generous arrangement with regard to long distance shopping, opening tax arbitrage possibilities to final consumers, favours low tax countries at the cost of their EC partners.

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  • Fehr, Hans & Rosenberg, Christoph B. & Wiegard, Wolfgang, 1991. "Value-added taxation in the EC after 1992: Some applied general equilibrium calculations," Discussion Papers, Series II 149, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:149
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    Cited by:

    1. Haufler, Andreas, 1991. "Alternative tax principles for the European Community: A computable general equilibrium comparison," Discussion Papers, Series II 151, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Boss, Alfred, 1999. "Do we need tax harmonization in the EU?," Kiel Working Papers 916, Kiel Institute for the World Economy (IfW Kiel).
    3. Plassmann, Florenz, 2005. "The advantage of avoiding the Armington assumption in multi-region models," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 777-794, November.

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