Impact of VAT Exemptions in the Postal Sector on Competition and Welfare

University of Zurich Institute for Strategy and Business Economics Working Paper No. 145

15 Pages Posted: 12 Jun 2011

See all articles by Helmut M. Dietl

Helmut M. Dietl

University of Zurich - Department of Business Administration (IBW)

Christian Jaag

Swiss Economics; University of St. Gallen - Institute of Public Finance and Fiscal Law

Markus Lang

University of Lausanne - Faculty of Social and Political Sciences

Martin Lutzenberger

University of Zurich - Department of Business Administration (IBW)

Urs Trinkner

University of Zurich - Department of Business Administration (IBW)

Date Written: November 10, 2010

Abstract

In most member states of the European Union (EU), universal postal services provided by the incumbent operator are exempt from value added taxes (VAT) on the grounds that they are the “public postal service.” Other postal service providers have to charge VAT at the standard rate. The paper sheds light on the main competitive impact of VAT policies while showing the consequences on overall welfare. We show that the results are very sensitive to the operators’ labor policies. Consequently, VAT exemptions have a different impact in countries with different labor regulations. The comprehensive treatment of competition and welfare enables us to provide guidance on how to resolve the policy trade-off between consumer surplus, government tax revenue, and a level playing field in liberalized postal markets.

Keywords: value-added tax, indirect taxation, tax regulation, tax exemption, universal service obligation, postal sector

JEL Classification: H21, H25, L51, L87

Suggested Citation

Dietl, Helmut M. and Jaag, Christian Yvo and Lang, Markus and Lutzenberger, Martin and Trinkner, Urs, Impact of VAT Exemptions in the Postal Sector on Competition and Welfare (November 10, 2010). University of Zurich Institute for Strategy and Business Economics Working Paper No. 145, Available at SSRN: https://ssrn.com/abstract=1862258 or http://dx.doi.org/10.2139/ssrn.1862258

Helmut M. Dietl

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Christian Yvo Jaag

Swiss Economics ( email )

Stampfenbachstr. 142
Zurich, CH-8006
Switzerland

University of St. Gallen - Institute of Public Finance and Fiscal Law ( email )

Rosenbergstrasse 51
St. Gallen, St. Gallen CH-9000
Switzerland

Markus Lang (Contact Author)

University of Lausanne - Faculty of Social and Political Sciences

Quartier UNIL-Centre
Synathlon
Lausanne, 1015
Switzerland

Martin Lutzenberger

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Urs Trinkner

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

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