How should commodities be taxed?: Market structure, product heterogeneity and the optimal structure of commodity taxes

This paper is concerned with the form in which commodity taxes are best imposed, and particularly with the appropriate balance between specific and ad valorem components. This neglected issue is of policy importance in relation to the harmonization of tax structures within the EEC, and of theoretica...

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Bibliographic Details
Published in:European economic review 1983-01, Vol.23 (3), p.339-358
Main Authors: Kay, J.A., Keen, M.J.
Format: Article
Language:English
Subjects:
Ad valorem taxes
Commodity
Economic models
Economic theory
Structure
Taxation
Taxes
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Summary:This paper is concerned with the form in which commodity taxes are best imposed, and particularly with the appropriate balance between specific and ad valorem components. This neglected issue is of policy importance in relation to the harmonization of tax structures within the EEC, and of theoretical interest as a point of contact between optimal tax theory and models of non-price competition. The roles of the two taxes as purely corrective devices under a variety of market forms are established and discussed. The analysis suggests that heavily taxed commodities should normally be subject to high specific rather than high ad valorem taxes.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(83)90037-5