Abstract
This paper study how a change in specific and ad valorem taxes under nonlinear pricing affects tax incidence. We show that an increase in either tax rate leads to a higher usage fee for all consumers, whereas the fixed fee under reasonable assumptions will fall. Finally, the model shows that the presumption in favor of ad valorem taxes over specific taxes also holds under nonlinear pricing and incomplete market coverage.
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Financial support from the Research Council of Norway is greatly appreciated. We would like to thank Robin Boadway, Vidar Christiansen, Kåre Petter Hagen, Andreas Haufler, Agnar Sandmo, and Andreas Wagener for useful insights and comments. The usual disclaimer applies.
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Jensen, S., Schjelderup, G. Indirect taxation and tax incidence under nonlinear pricing. Int Tax Public Finance 18, 519–532 (2011). https://doi.org/10.1007/s10797-011-9167-y
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DOI: https://doi.org/10.1007/s10797-011-9167-y