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Title:Does indirect tax harmonization deliver pareto improvements in the presence of global public goods? PDF Logo
Authors:Karakosta, Ourania
Kotsogiannis, Christos
Lopez-Garcia, Miguel-Angel
Issue Date:2009
Series/Report no.:CESifo working paper 2668
Abstract:This paper identifies conditions under which, starting from any tax distorting equilibrium, destination- and origin-based indirect tax-harmonizing reforms are potentially Pareto improving in the presence of global public goods. The first condition (unrequited transfers between governments) requires that transfers are designed in such a way that the marginal valuations of the global public goods are equalized, whereas the second (conditional revenue changes) requires that the change in global tax revenues, as a consequence of tax harmonization, is consistent with the direction of inefficiency in global public good provision relative to the (modified) Samuelson rule. Under these conditions, tax harmonization results in redistributing the gains from a reduction in global deadweight loss and any changes in global tax revenues according to the Pareto principle. And this is the case independently of the tax principle in place (destination or origin).
Subjects:origin principle
destination principle
indirect tax harmonization
reform of commodity taxes
global/local public goods
JEL:F15
H21
H41
H87
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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