Dietl, Helmut; Jaag, Christian; Lang, Markus; Lutzenberger, Martin; Trinkner, Urs (2011). Impact of VAT-exemptions in the postal sector on competition and welfare. In: Crew, M A; Kleindorfer, P R. Reinventing the postal sector in an electronic age. Cheltenham, UK: Elgar, 267-280.
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The focus of our paper is on the competitive effects of the proposed VAT regime relative to selected alternatives. We also highlight the welfare effects of various VAT scenarios. While an exempt operator cannot reclaim VAT paid on inputs (relevant for non-labor inputs only) and therefore faces higher costs ceteris paribus, an important fraction of customers of non-exempt operators will not be able to deduct VAT themselves. Hence, the exempt incumbent operator has on the one hand a cost disadvantage, and on the other, a price advantage. The net effect will depend on the fraction of non-labor inputs relative to the fraction of non-rated customers. We report market shares, optimum prices, tax revenue and welfare in a liberalized postal market. The various scenarios differ by the operators’ VAT status. We also take into account the fraction of non-rated customers that cannot deduct VAT themselves. The paper sheds light on the main competitive impact of VAT policies while showing the consequences on overall welfare. We show that the results are very sensitive to the operators’ labor policies. Consequently, VAT exemptions have a different impact in countries with different labor regulations. The comprehensive treatment of competition and welfare enables us to provide guidance on how to resolve the policy trade-off between consumer surplus, government tax revenue, and a level playing field in liberalized postal markets.
|Item Type:||Book Section, refereed, further contribution|
|Communities & Collections:||03 Faculty of Economics > Department of Business Administration|
|Dewey Decimal Classification:||330 Economics|
|Deposited On:||09 Mar 2011 08:40|
|Last Modified:||04 Apr 2012 13:52|
|Series Name:||Advances in regulatory economics series|
|ISBN:||978-1-8498-0360-1 (P) 978-1-8498-0596-4 (E)|
|Related URLs:||http://www.e-elgar.co.uk/bookentry_main.lasso?id=14073 (Publisher)|
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