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Title:Failure of ad valorem and specific tax equivalence under uncertainty PDF Logo
Authors:Goerke, Laszlo
Herzberg, Frederik
Upmann, Thorsten
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Finance 3946
Abstract:Applying a framework of perfect competition under uncertainty, we contribute to the discussion of whether or not ad valorem taxes and specific taxes are equivalent. While this equivalence holds without price uncertainty, we show that ad valorem taxes and specific taxes are almost never equivalent in the presence of uncertainty if we demand equivalence to hold pathwise. Since we obtain this result under perfect competition, our analysis also provides a further rationale for why the equivalence must fail under imperfect competition.
Subjects:ad valorem taxes and specific taxes
revenue neutrality
price uncertainty
concept of pathwise neutrality
JEL:H20
H21
H61
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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