The comparison between ad valorem and specific taxation under two-part tariffs
Working paper
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http://hdl.handle.net/11250/163182Utgivelsesdato
2009-06Metadata
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- Discussion papers (SAM) [662]
Sammendrag
In this paper, we compare ad valorem and specific taxation under heterogeneous
demand when a monopolist offers a menu of two-part tariffs.
An increase in either tax rate leads to a higher usage fee for all consumers,
whereas the fixed fee under reasonable assumptions will fall. If the government
changes the mix of taxes in such a way that the firm’s behavior is
unchanged, a system of wholly ad valorem taxation generates higher tax
revenue than does a system of wholly specific taxes. Tax reform designed
to leave tax revenue constant leads to a lower per usage fee and a higher
fixed fee for all consumers. It also increases market coverage, profits, tax
revenue, and the consumer surplus.
Utgiver
Norwegian School of Economics and Business Administration. Department of EconomicsSerie
Discussion paper2009:5