Indirect Tax Reforms and Public Goods under Imperfect Competition

This paper examines, within an imperfectly competitive environment with public goods, the welfare effects of three popular indirect tax reforms: i) a tariff cut combined with an equal increase in the consumption tax, ii) a tariff cut combined with an increase in the consumption tax that leaves consumer price unchanged, and iii) an export tax reduction combined with an equal increase in the production tax. It is shown that the welfare effects of these reforms are ambiguous, in that they depend on the strength of the consumers’ valuation of the public goods. This result contrasts existing results in the literature that ignores public goods provision.Tariff Reform, Tax Reform, Imperfect Competition, Public goods

Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?

This paper identifies conditions under which, starting from any tax distorting equilibrium, destination- and origin-based indirect tax-harmonizing reforms are potentially Pareto improving in the presence of global public goods. The first condition (unrequited transfers between governments) requires that transfers are designed in such a way that the marginal valuations of the global public goods are equalized, whereas the second (conditional revenue changes) requires that the change in global tax revenues, as a consequence of tax harmonization, is consistent with the direction of inefficiency in global public good provision relative to the (modified) Samuelson rule. Under these conditions, tax harmonization results in redistributing the gains from a reduction in global deadweight loss and any changes in global tax revenues according to the Pareto principle. And this is the case independently of the tax principle in place (destination or origin).origin principle, destination principle, indirect tax harmonization, reform of commodity taxes, global/local public goods

Indirect tax harmonization and global public goods

Journal Article“The final publication is available at Springer via http://dx.doi.org/10.1007/s10797-012-9246-8”.This paper identifies conditions under which, starting from any tax-distorting equilibrium, destination- and origin-based indirect tax-harmonizing reforms are potentially Pareto improving in the presence of global public goods. The first condition (unrequited transfers between governments) requires that transfers are designed in such a way that the marginal valuations of the global public goods are equalized, whereas the second (conditional revenue changes) requires that the change in global tax revenues, as a consequence of tax harmonization, is consistent with the under/over-provision of global public goods relative to the (modified) Samuelson rule. Under these conditions, tax harmonization results in redistributing the gains from a reduction in global deadweight loss and any changes in global tax revenues according to the Pareto principle. And this is the case independently of the tax principle in place (destination or origin). © 2012 Springer Science+Business Media, LLC

Δοκίμια φορολογικού ανταγωνισμού

The first Chapter, focuses on a particular (and very popular) form of indirect tax harmonization, when the (good) market is imperfectly competitive (and homogenous). It discusses the implication of tax harmonization for welfare when the governments raise revenues to provide global public goods. It shows that, under certain indirect tax harmonization will generate potential Pareto improvements. And, interestingly, this is true independently of the tax principle in place (destination or origin). Chapter two analyzes a simple model of imperfect commodity tax competition in a federal system where fiscal externalities arise not only horizontally across the `states' but also vertically between levels of government. Commodity taxation can take place either under the destination or origin principle and taxes can be either specific or ad valorem. Within such framework the interplay between the vertical tax externalities, that arise due to the commonality of the tax base, and the horizontal tax externalities associated with inter-state trade is explored. It is shown that independently of the tax principle and the type of tax levied, state taxation is too low (high), from an equilibrium point of view, if and only if consumers place a high (low) valuation on the state public expenditure relative to the federal. Chapter three focuses on capital taxation in a federal system too, extending, in particular, the model of Keen and Kotsogiannis (2002) to ad valorem taxation. It shows that, although under ad valorem taxation the fiscal externalities can be of any sign, the welfare implications of lower-level government ad-valorem taxation critically depends (as in Chapter two) on the deviation of the marginal valuation of federal public expenditure from the marginal valuation of lower-level government public expenditure. Chapter four returns to tax harmonization but it does so within an environment in which there is product differentiation. The analysis focuses on the welfare implication of a specific tax harmonization rule under both the destination and origin regimes but under different settings of international duopoly (Cournot and Bertrand). Chapter five re-examines the Keen and Lighart (2005) proposition by allowing governments to provide, with the tax revenues collected, a public good. It is shown that, in contrast to the Keen and Lighart (2005) results, in the presence of public goods the desirability of tariff and tax reforms is ambiguous.Το πρώτο κεφάλαιο αναφέρεται στις επιπτώσεις της φορολογικής εναρμόνισης στην ευημερία, σε ένα πλαίσιο με δύο χώρες και ατελή ανταγωνισμό, όταν τα δημόσια αγαθά είναι παγκόσμια. Καθορίζονται οι προϋποθέσεις κάτω από τις οποίες η φορολογική εναρμόνιση θα οδηγήσει σε βελτίωση κατά Paretο υπό τη φορολογική αρχή της χώρας προορισμού αλλά και τη φορολογική αρχή της χώρας προέλευσης. Το δεύτερο κεφάλαιο διερευνά την αλληλεπίδραση μεταξύ των κάθετων φορολογικών εξωτερικών επιδράσεων που προκύπτουν σε ένα ομοσπονδιακό σύστημα λόγω της κοινής φορολογικής βάσης των δυο επιπέδων διακυβέρνησης και των οριζόντιων επιδράσεων που προκύπτουν από την κινητικότητα της φορολογικής βάσης διακρατικά, σε ένα υπόδειγμα φορολογίας προϊόντων. Αποδεικνύεται ότι, ανεξάρτητα από τη φορολογική αρχή (προορισμού ή προέλευσης) και το είδος του φόρου που επιβάλλεται (ειδικό ή κατ 'αξία), η ευημερία στην ομοσπονδία αυξάνεται μετά από μια μικρή αύξηση (μείωση) του φορολογικού συντελεστή, αν και μόνο αν το δημόσιο αγαθό που παρέχεται από την κυβέρνηση του κράτους εκτιμάται από τους καταναλωτές περισσότερο (λιγότερο) σε σχέση με το δημόσιο αγαθό που παρέχεται από την ομοσπονδιακή κυβέρνηση. Το τρίτο κεφάλαιο αναφέρεται επίσης στη φορολόγηση σε ομοσπονδιακά συστήματα αλλά επικεντρώνεται στην κατ 'αξία φορολόγηση του κεφαλαίου. Σύμφωνα με την βιβλιογραφία, οι οριζόντιες εξωτερικές επιδράσεις ωθούν προς κρατικούς φόρους που είναι πάρα πολύ χαμηλοί, ενώ οι κάθετες προς κρατικούς φόρους που είναι πάρα πολύ υψηλοί. Το κεφάλαιο αυτό δείχνει ότι, στην περίπτωση της κατ 'αξία φορολόγησης κεφαλαίου τα αποτελέσματα αυτά μπορεί να αντιστραφούν κάτω από συγκεκριμένες συνθήκες. Επίσης, η ισορροπία των οριζόντιων και κάθετων φορολογικών εξωτερικών επιδράσεων εξαρτάται από την οριακή χρησιμότητα των καταναλωτών για τα δημόσια αγαθά που παρέχονται από τα δύο επίπεδα διακυβέρνησης. Το τέταρτο κεφάλαιο επιστρέφει στη μελέτη της φορολογική εναρμόνισης, αλλά το κάνει αυτό μέσα σε ένα περιβάλλον στο οποίο υπάρχει διαφοροποίηση των προϊόντων. Ειδικότερα, στόχος αυτού του κεφαλαίου είναι να απαντήσει στην εξής ερώτηση: Τι ρόλο διαδραματίζει ο βαθμός διαφοροποίησης των προϊόντων στα αποτελέσματα της φορολογική εναρμόνισης; Η ανάλυση μελετά τις επιπτώσεις της φορολογικής εναρμόνισης στην ευημερία υπό τη φορολογική αρχή της χώρας προορισμού και τη φορολογική αρχή της χώρας προέλευσης, αλλά υπό διαφορετικούς τύπους του διεθνούς δυοπωλίου (Cournot και Bertrand). Το τελευταίο κεφάλαιο δείχνει ότι οι δασμολογικές και φορολογικές μεταρρυθμίσεις, οι οποίες αναμφίβολα μειώνουν την ευημερία μια χώρας σύμφωνα με τους Keen και Lighart (2005), μπορούν να έχουν θετική επίδραση στην ευημερία όταν τα φορολογικά έσοδα δεν επιστρέφονται στους καταναλωτές αλλά χρησιμοποιούνται για την παροχή δημόσιων αγαθών

The EU electricity market: renewables targets, Tradable Green Certificates and electricity trade

Several EU member states have introduced national systems of Tradable Green Certificates (TGCs), which stipulate the percentage of total energy consumption to be obtained from renewable sources. The Renewable Energy Directive sets a binding EU-wide target of 32% but without imposing legally binding national targets. To assess incentives for the choice of national percentage requirements we develop a two-country, Cournot duopoly model of the electricity market, with one "green" and one "black" supplier in each country. We show that nationally determined percentage requirements do not align with the EU-welfare maximizing renewable energy target due to cross-country externalities arising from trade in electricity and the market price of TGCs and examine the direction of misalignment. Our results cast doubts on the feasibility of EU renewable energy policy in the absence of binding national targets and inform how national targets should be shaped

Indirect tax harmonization and global public goods

Financial support from the Catalan Government Science Network (2009SGR and XREPP) and the Spanish Ministry of Education and Science Research Project (ECO2009-10003) is gratefully acknowledged.This paper identifies conditions under which, starting from any tax-distorting equilibrium, destination- and origin-based indirect tax-harmonizing reforms are potentially Pareto improving in the presence of global public goods. The first condition (unrequited transfers between governments) requires that transfers are designed in such a way that the marginal valuations of the global public goods are equalized, whereas the second (conditional revenue changes) requires that the change in global tax revenues, as a consequence of tax harmonization, is consistent with the under/over-provision of global public goods relative to the (modified) Samuelson rule. Under these conditions, tax harmonization results in redistributing the gains from a reduction in global deadweight loss and any changes in global tax revenues according to the Pareto principle. And this is the case independently of the tax principle in place (destination or origin)

Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?

This paper identifies conditions under which, starting from any tax distorting equilibrium, destination- and origin-based indirect tax-harmonizing reforms are potentially Pareto improving in the presence of global public goods. The first condition (unrequited transfers between governments) requires that transfers are designed in such a way that the marginal valuations of the global public goods are equalized, whereas the second (conditional revenue changes) requires that the change in global tax revenues, as a consequence of tax harmonization, is consistent with the direction of inefficiency in global public good provision relative to the (modified) Samuelson rule. Under these conditions, tax harmonization results in redistributing the gains from a reduction in global deadweight loss and any changes in global tax revenues according to the Pareto principle. And this is the case independently of the tax principle in place (destination or origin)