Lockwood, Ben and Migali, Giuseppe (2008) Did the single market cause competition in excise taxes? Evidence from EU countries. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

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Abstract

The introduction of the Single Market resulted in a switch from destination to origin-based taxation of cross-border transactions by individuals. The theory of commodity tax competition predicts that this change should give rise to excise tax competition and thus intensify strategic interaction in the setting of excise taxes. In this paper, we provide an empirical test of this prediction using a panel data set of 12 EU countries over the period 1987-2004. We find that for all excise duties that we consider (still and sparkling wine, beer, ethyl alcohol, and cigarettes), strategic interaction between countries significantly increased after 1993, consistently with the theoretical prediction. Indeed, for all these products except for cigarettes, there is no evidence of strategic interaction prior to 1993, so our findings are consistent with the hypothesis that the single market caused tax competition. For beer and ethyl alcohol, there is evidence that the minimum taxes, also introduced in 1993, have intensified strategic interaction.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Single European Act (1986), Tariff -- Europe, Taxation -- Europe, Competition, International, Europe -- Economic policy
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	22 February 2008
Number:	No.847
Number of Pages:	29
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/1368

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