141.
This paper shows that the welfare implications of indirect tax harmonization in a two-country imperfectly competitive framework,
are, in general,
indeterminate in the presence of public goods: Both countries can be made
either worse off
or better off. This holds under both the destination and origin principles of taxation and is in sharp contrast to existing
results where revenue effects are not present. A consequence of this indeterminacy is that a precise evaluation of tax-harmonizing
policies under both tax regimes requires an explicit consideration of the underlying preferences for private and public goods
as well as the oligopolistic sectors’ relative cost structures.
JEL code F15⋅ H21⋅ H41⋅ H87
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