Abstract
The three tax principles are compared using a multiproduct custom union model. It is shown that if member countries use the destination or origin principles, no distortion or redistribution of income occurs, even if their tax rates differ. However, under the restricted origin principle, different tax rates result in distortion and income redistribution. Equal tax rates still result in a redistribution of real income. An exact measurement of this redistribution is derived. Given these results it seems possible to conclude that the origin principle is superior to the other tax principles.
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