Commodity Taxation and Parallel Imports

25 Pages Posted: 6 Jun 2008

See all articles by Pascalis Raimondos

Pascalis Raimondos

Queensland University of Technology - School of Economics and Finance; Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Nicolas Schmitt

Simon Fraser University; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

We examine the interaction between commodity taxes and parallel imports in a simple two-country model with imperfect competition. While governments determine non-cooperatively their commodity tax rate, the volume of parallel imports is determined endogenously by the retailing sector. We compare the positive and normative implications of having commodity taxes based on destination or origin principle. Origin taxes are shown to have very attractive properties: they lead to lower levels of optimal taxes, they converge as parallel imports increase (while destination taxes diverge), and they lead to higher welfare levels.

Keywords: commodity taxation, market integration, Parallel import

JEL Classification: F12, F15, H21, H24

Suggested Citation

Raimondos, Pascalis and Schmitt, Nicolas, Commodity Taxation and Parallel Imports. CEPR Discussion Paper No. DP6580, Available at SSRN: https://ssrn.com/abstract=1140510

Pascalis Raimondos (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Copenhagen Business School - Department of Economics ( email )

Solbjergs Plads 3
DK-2000 Frederiksberg C
Denmark
+45 38 152 594 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Nicolas Schmitt

Simon Fraser University ( email )

Department of Economics
8888 University Drive
Burnaby, BC V5A 1S6
Canada
604 291 4582 (Phone)

HOME PAGE: http://www.sfu.ca/~schmitt/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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