International Tax and Public Finance

, Volume 20, Issue 4, pp 618–630 | Cite as

Cross-border shopping and the Atkinson–Stiglitz theorem

Article

Abstract

We introduce cross-border shopping and indirect tax competition into a model of optimal taxation. The Atkinson–Stiglitz result that indirect taxation cannot improve the efficiency of information-constrained tax-transfer policies, and that indirect taxes should not be differentiated across goods, is shown to hold in this case even if countries are asymmetric. However, if the tax system must contain indirect taxation, differentiated indirect tax rates arise in the equilibrium and restricting differentiated indirect taxation can be welfare-increasing.

Keywords

Cross-border shopping Atkinson–Stiglitz theorem Tax competition Direct and indirect taxes 

JEL Classification

H21 F15 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of SiegenSiegenGermany

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