Harmonizing fiscal policy: Indirect taxes and global public goods

This article focuses on the welfare effects of the interaction of a rule of indirect tax harmonization under the destination principle and the provision of public goods that are global in nature. It stresses the role of international transfers between governments set in order to equalize the social...

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Bibliographic Details
Published inReview of international economics Vol. 32; no. 5; pp. 2095 - 2104
Main Author Lopez‐Garcia, Miguel‐Angel
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.11.2024
Subjects
Fiscal policy
global public goods provision
Harmonization
harmonization of fiscal policy
indirect taxation
Public goods
Taxation
Welfare
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Summary:This article focuses on the welfare effects of the interaction of a rule of indirect tax harmonization under the destination principle and the provision of public goods that are global in nature. It stresses the role of international transfers between governments set in order to equalize the social (i.e., worldwide) marginal cost of public funds across countries. Under this condition, it is shown how the combination of the tax and expenditure side of such a “harmonizing fiscal policy” can give rise to a potential Pareto improvement. This requires considering aggregate revenue effects (and the ensuing effects on the provision of public goods) of the fiscal reform jointly with under/over provision of public goods in the (first‐best) Samuelson sense.
ISSN:0965-7576
1467-9396
DOI:10.1111/roie.12769