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How should payment services be taxed?
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Lockwood, Ben and Yerushalmi, Erez (2019) How should payment services be taxed? Social Choice and Welfare, 53 (1). pp. 21-47. doi:10.1007/s00355-019-01178-6 ISSN 0176-1714.
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Official URL: https://doi.org/10.1007/s00355-019-01178-6
Abstract
This paper considers the design of taxes on real money balances and bank payment services, when realistically, the household can use either cash or a bank payment account for the purchase of different varieties of goods. These taxes, plus a consumption tax, fund a government revenue requirement. We find that generally, real money balances and bank transaction fees should be taxed, and at different rates, i.e. the tax system should not leave the choice of payment services undistorted. For a wide class of time transactions cost technologies, including the Baumol-Tobin case, fees should be taxed at a lower rate than real money balances, and the tax on real money balances should be positive. However, it is possible that fees should be subsidized. The rate of tax on fees has no simple relationship to the optimal consumption tax, and can be higher or lower. A Corlett-Hague type intuition for these results is also developed, which relies on the concept of a virtual time endowment.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||||||
Library of Congress Subject Headings (LCSH): | Intermediation (Finance) -- Taxation, Banks and banking -- Taxation, Value-added tax | ||||||||
Journal or Publication Title: | Social Choice and Welfare | ||||||||
Publisher: | Springer | ||||||||
ISSN: | 0176-1714 | ||||||||
Official Date: | June 2019 | ||||||||
Dates: |
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Volume: | 53 | ||||||||
Number: | 1 | ||||||||
Number of Pages: | 27 | ||||||||
Page Range: | pp. 21-47 | ||||||||
DOI: | 10.1007/s00355-019-01178-6 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 23 January 2019 | ||||||||
Date of first compliant Open Access: | 8 April 2019 | ||||||||
RIOXX Funder/Project Grant: |
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