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International Tax and Public Finance

, Volume 14, Issue 2, pp 135–149 | Cite as

Imperfect competition, indirect tax harmonization and public goods

  • Christos Kotsogiannis
  • Miguel-Angel Lopez-Garcia
Article

Abstract

This paper shows that the welfare implications of indirect tax harmonization in a two-country imperfectly competitive framework, are, in general, indeterminate in the presence of public goods: Both countries can be made either worse off or better off. This holds under both the destination and origin principles of taxation and is in sharp contrast to existing results where revenue effects are not present. A consequence of this indeterminacy is that a precise evaluation of tax-harmonizing policies under both tax regimes requires an explicit consideration of the underlying preferences for private and public goods as well as the oligopolistic sectors’ relative cost structures.

Keywords

Origin principle Destination principle Indirect tax harmonization Reform of commodity taxes Public goods 

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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  • Christos Kotsogiannis
    • 1
    • 2
  • Miguel-Angel Lopez-Garcia
    • 3
  1. 1.Department of EconomicsUniversity of Exeter, School of Business and EconomicsEngland, UK
  2. 2.Athens University of Economics and BusinessAthensGreece
  3. 3.Departamento de Economia AplicadaUniversidad Autonoma de BarcelonaBarcelonaSpain

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