On the Value Added Taxation Status of National Postal Operators

Donder, Philippe De; Cremer, Helmuth; Dudley, Paul; Rodriguez, Frank

doi:10.2202/1446-9022.1178

“…Deutsche Post announced net price decreases equal to the VAT rate itself, which is significantly more than we predict in our simulation. 15 Our welfare results differ from those reported by De Donder et al (2009), which yield higher welfare in Scenario B. Whereas the authors also report higher consumer surplus in Scenario A, they multiply government tax revenues by 1.3 to reflect the shadow cost of public funds and therefore find higher overall welfare in Scenario B.…”

contrasting

confidence: 76%

“…Dieke and Elixmann (2005) quantify the effects of such exemptions for postal operators on government tax revenue. De Donder et al (2009) focus on the pricing and welfare implications of changing a postal operator's VAT status. Crew et al (2009) discuss the importance of VAT exemptions in the framework of the prospective study by PwC (2006).…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Competition and Welfare Effects of VAT Exemptions

Dietl¹,

Jaag²,

Lang³

et al. 2011

The B.E. Journal of Economic Analysis &Amp; Policy

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istortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue. DOI AbstractDistortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue.

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“…The significance of VAT exemptions to the emergence of competition in liberalized postal markets has not been explicitly analyzed and discussed: while De Donder et al (2009) focus on the pricing and welfare implications of changing a postal operator's VAT status, Dieke and Elixmann (2005) try to quantify the effect of VAT exemptions for postal operators on government tax revenue. Crew et al (2009) discuss the importance of VAT exemptions in the framework of the prospective study by PwC (2006).…”

Section: Introductionmentioning

confidence: 99%

“…The paper sheds light on the main competitive impact of VAT policies while showing the consequences on overall welfare. Relative to the work of De Donder et al (2009), who assume that entrants act as a competitive fringe, we model profits of both the incumbent and new market entrants. This allows us to provide a more comprehensive treatment of competitive effects of VAT policies.…”

Section: Introductionmentioning

confidence: 99%

Impact of VAT Exemptions in the Postal Sector on Competition and Welfare

Dietl

¹

,

Jaag

²

,

Lang

³

et al. 2010

SSRN Journal

2

0

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In most member states of the European Union (EU), universal postal services provided by the incumbent operator are exempt from value added taxes (VAT) on the grounds that they are the "public postal service." Other postal service providers have to charge VAT at the standard rate. 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.

show abstract

Competition and Welfare Effects of VAT Exemptions

Dietl

¹

,

Jaag

²

,

Lang

³

et al. 2010

SSRN Journal

1

0

View full text Add to dashboard Cite

istortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue. DOI AbstractDistortions under the value-added tax (VAT) arise partly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities. We analyze the effects of such asymmetric tax regimes on market shares, optimal prices, tax receipts, and social welfare. The analytical model shows how asymmetric VAT exemptions distort competition by strengthening the competitive position of non-rated firms. The net effect of such tax exemptions depends on the fraction of VAT-rated inputs versus the fraction of non-rated customers. We further elucidate main competitive impacts of VAT policies, while showing their consequences on overall welfare by presenting simulation results based on a calibrated quantitative model of a selected sector. Our paper provides guidance on how to resolve the policy trade-off between a level playing field in the market, consumer surplus, and government tax revenue.

show abstract

On the Value Added Taxation Status of National Postal Operators

Cited by 3 publications

References 5 publications

Competition and Welfare Effects of VAT Exemptions

Competition and Welfare Effects of VAT Exemptions

Impact of VAT Exemptions in the Postal Sector on Competition and Welfare

Competition and Welfare Effects of VAT Exemptions

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