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International Tax and Public Finance

, Volume 2, Issue 2, pp 221–228 | Cite as

Environmental taxes on intermediate and final goods when both can be imported

  • James M. Poterba
  • Julio J. Rotemberg
Article

Abstract

One of the most difficult administrative problems in implementing broad-based environmental taxes concerns the tax treatment of imports, particularly imports of final goods that are producedusing intermediate goods that are taxed domestically. Provided there is no joint production, taxing imported final goods based on the amount of intermediate goods consumed in their domestic production will raise marginal costs by the same amount for domestic and foreign producers. This rule is impossible to implement when final goods are produced as joint products, however, as in the petroleum refining and petrochemical industries. In such cases arbitrary assignments of intermediate good inputs to final goods-for example, on the basis of relative output weight or value-are likely to change the relative marginal costs of domestic and foreign producers.

Key words

environmental taxes pigouvian taxes joint production 

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References

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Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • James M. Poterba
    • 1
  • Julio J. Rotemberg
    • 2
  1. 1.Department of Economics, E52-35DMassachusetts Institute of TechnologyCambridge
  2. 2.Sloan School of ManagementMassachusetts Institute of TechnologyCambridge

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