Cross-border Purchases Research Articles

Optimal Fiscal Policy in an Open Economy with Capital Income Shifting and Consumer Cross-Border Purchases

The traditional theory of international tax competition for production factors or any of its expansions give neither a satisfactory explanation of the problem that would find confirmation in empirical data nor normative solutions for the shape of the optimal tax system. It seems that such a theory requires consideration of tax avoidance, the complexity of tax systems and fiscal solvency hypothesis. The paper presents a fiscal policy model integrating all the three concepts within the traditional framework of tax competition. Especially we take into account: taxation of consumption, possibility of capital income shifting and – untaxed in the destination country – foreign goods purchases. We conclude that if fiscal policy is by no means unfettered the equilibrium is allocation efficient, provided the marginal rate of substitution between private and public goods to be one. The tax on consumption is hence driven by the tax sensitivity of domestic and foreign purchases and the total volume of foreign purchases in the country and the tax on capital is determined by: the labour productivity effect, the capital income effect, the consumption effect and the tax burden exportation effect. One can show that this approach is especially useful during solvency crisis and can be applied to predict tax rates’ adjustment when the bonds issuance decreases or public debt accelerates.

Taxation and cross-border purchases of automotive fuels

The drivers of a small country such as Slovenia can buy fuel for their vehicles in either their homeland or in a neighbouring country, therefore its relative prices have a vital impact on tax revenue. The significant reduction in other tax revenues triggered by the economic crisis has made it necessary to analyse the Slovenian government’s excise tax policy. A simple demand model enables us to identify the impact of changes in tax policy on automotive fuel purchases, tax revenues, and the distributors’ earnings in the country’s inland and border regions. A spatial partition of the three hundred and twenty petrol stations sampled shows the allocations implemented by the petrol station owners, while the estimated volume of transportation is based on the number of vehicle crossings at road sites with automatic traffic meters. The direct- and cross-price elasticity of the demand for petrol and automotive diesel are estimated using panel and regional monthly time series data. The results indicate that the current excise tax policy has a strong impact on the sales of automotive diesel but has a weaker impact on petrol purchases. The excise tax policy generated a significantly higher increase in tax revenues and reduced the distributors’ net income.

Consumer Dispute Resolution after The Lisbon Treaty: Collective Actions and Alternative Procedures

Access to justice remains a major challenge in EU consumer law, which has become more pressing with growing cross-border purchases, negatively affecting the common market. Moreover, a recent surge in supranational mass damages cases has highlighted market failures and the need for collective procedures. Under the Lisbon Treaty, new opportunities have arisen to close this civil justice gap. This article analyzes how the wider competences of the EU on access to justice can facilitate consumer redress, by putting special emphasis on the issue of the affordability of litigation, which has been so far underexplored. This work argues that collective procedures, combined with coherent out-of-court mechanisms and funding schemes, are key elements of an effective consumer dispute resolution system. In particular, specific cases and financing models are assessed, which have the potential to foster judicial protection of consumers.

Exploring Foreign Market Access in Government Procurement

A home-bias in public purchases can have non-trivial efficiency effects, especially in times of crises. Using unexplored Japanese and Swiss public procurement data over 1990-2003, we examine the presence of a home-bias by controlling for the effect of macroeconomic, political economy, procurement-specific and domestic policy factors on governments’ sourcing decisions. We also provide an empirical test of Baldwin's (1970, 1984) neutrality proposition and of the effectiveness of the WTO's Agreement on Government Procurement (GPA) in increasing foreign market access. Our results suggest that Swiss public purchases may have been more discriminatory than the Japanese’s during this period. They also reveal the importance of procurement demand magnitude and domestic-foreign productivity differences in both governments' cross-border purchases. However, the expected impact of traditional macroeconomic variables, political budget cycles and public-private imports substitutability does not come through. Significantly, membership of the GPA is not found to increase foreign access to either country’s public markets.

The effects of cross-border tourist purchases on retail performance

One of the major novelties in modern retail that is gaining more and more prominence is the concept of cross-border shopping. Factors affecting the rapid development of cross-border shopping are numerous, such as price differentiation, quality, convenience, demographic and social characteristics, good organizational structure developed in modern retail and many others. Among the influencing factors, the role of price differentiation of goods and services is very important and it is also affected by numerous factors. Those are: value added tax, profit margins, operating costs, exchange rates, inflation, differentiation of organizational structure in retail, the application of advanced information and communication technology and others. Cross-border shopping is, in itself, very important influential factor for the development of tourism, target retail market, performance of retail companies and living standard. Altogether, this has a positive effect on the overall performance of the national economy.

Excise Tax Policy and Cross-Border Purchases of Automotive Fuels

In a small open country such as Slovenia, drivers can either purchase automotive fuel within the country or abroad. A simple demand model is used to test the proposition that changes in excise tax policy caused the decline of purchases in the country, and to delineate the effects of excise tax policy from the effects of the simultaneously occurring economic crisis. To do that, short- and long-run, and direct- and cross-price elasticities are estimated for the purchase of gasoline and automotive diesel in five regions: Slovenia's four border regions and the interior.For the estimation of volume of transportation elasticity, vehicle crossings through road sites with automatic traffic meters are used. The simulations indicate that more than half of the decline in the purchase of automotive fuels in 2009 can be attributed to excise tax policy and less than half to the economic crisis, and that the increase in tax revenues generated by excise tax policy significantly exceeded the decrease in the sellers' earnings.

Cross-Border Shopping: A Survey

The aim of this paper is to undertake a review of the most important literature on the phenomenon of fiscally induced cross-border shopping. Following the presentation of the principal theoretical models, the study concentrates on applied literature. Firstly, the elements common to the diverse applications are described, and then, a detailed analysis of the research undertaken into cross-border shopping for alcoholic drinks, tobacco, fuel, and lotteries is provided, concluding with a reference to the interaction between cross-border purchases and those effected over the internet. The results achieved by the empirical research coincide and support the principal result of the theoretical literature: the tax differentials between neighboring territories induce consumers to purchase in the territory where taxation is lower, on the condition that the tax saving compensates for the transport costs associated with the travel made by the purchaser in order to take advantage of the lower taxation.

AN ANALYSIS OF INTERNATIONAL PRICE DIFFERENTIALS ON EBAY

I. INTRODUCTION No one likes to pay too much. In the language of economists, this translates into the of one which essentially says that if different prices are charged for similar goods at different locations, some clever agent will engage in arbitrage. By buying goods at cheap locations and selling them where prices are high, he forces prices to converge. Despite the intuitive appeal of the law of one price, empirical evidence is mixed. Prices are found to differ within cities, between cities, and between countries. (1) Of particular interest for this study is that empirical analysis has found evidence of effects, that is, prices between countries differ by more than prices within a country. (2) The border is typically explained by lack of transparency, that is, exchange rates hampering trade, as they require tedious conversion of foreign prices into home currency (Parsley and Wei, 1996). Are there on the Internet? The Internet has changed the way consumers and sellers interact. The introduction of modern communication technologies has increased price transparency: online shops in foreign countries can be browsed free of charge, Internet Web sites aid consumers to find the cheapest prices, and ample opportunities exist for comparing prices across countries. Moreover, payment sites as PayPal.com facilitate cross-border purchases. Online markets are a step closer to an economist's ideal of a frictionless, competitive market. A related of the Internet is that it offers new ways to measure prices. Online auctions provide economists with data that can be used to measure prices and investigate price formation. Using data from eBay, we investigate price differentials in Europe. Of all Internet auction sites, eBay is the largest one, and its (economic) importance is rapidly growing: According to its annual report, 180.6 million users from more than 150 countries listed 1.9 billion items on eBay in 2005. The total value of goods sold that year reached nearly 44 billion U.S. dollars, representing a 30% increase over 2004. Compared with, for example, scanner data from supermarkets, Internet auctions have a number of advantages: first, prices for a broad range of goods are easily observable. Second, all items are shipped by surface mail and thus highly tradable. Third, goods do not require costly display in shops. This reduces the non-tradable cost component, relative to traditional retailers. And lastly, comparing online auction prices is simply more realistic than investigating international price differentials in supermarkets: few, say, Italian consumers would drive to the United Kingdom to do grocery shopping, but it is not unreasonable to assume that they buy an English copy of a Harry Potter book at eBay from a British seller. We examine two issues: First, comparing prices consumers pay for tradable goods in different countries, we establish that online consumers pay different prices for similar goods. Second, we want to get insights into the causes of these price differentials. Does the effect stem from countries, having different currencies, or from having national borders? We do this by comparing prices between the United Kingdom and the euro area and within the euro area. Price differentials within the euro area cannot stem from different currencies, as all countries share the euro as common currency. To preview the conclusions, we find evidence of substantial differences in price levels. In addition, price dispersion seems to be related to whether or not countries share a common currency. Hence, we find evidence that national borders create frictions (which result in price differentials), and the magnitude of the differential is increasing if countries do not share a common currency. This study contributes to the literature in several ways. First, we use eBay to evaluate a macroeconomic concept. Second, this is one of the first studies to use data from the euro area and the United Kingdom to analyze the source of the effect. …

Quantitative and qualitative estimates of cross-border tobacco shopping and tobacco smuggling in France

Objective:In France, cigarette sales have fallen sharply, especially in border areas, since the price increases of 2003 and 2004. It was proposed that these falls were not due to people...

Redress and Alternative Dispute Resolution in EU Cross-Border E-Commerce Transactions1

Effective dispute settlement is regarded as one of the means of enhancing consumer confidence in cross-border purchases over the Internet. Yet, studies of online dispute resolution (ODR) show, on the whole, poor uptake of ODR by the public. This paper is based on a research project carried out by the authors (funded by the European Parliament) which explored why so few people resort to ODR and what are the implications of low uptake for consumer confidence in cross-border e-commerce. The authors expand the traditional definition of ODR and introduce a distinction between what they term ‘hard’ or traditional ODR processes and the more novel ‘soft’ ODR processes. The low uptake of ‘hard’ ODR is critically considered, as are the theoretical advantages and disadvantages of ‘hard’ and ‘soft’ ODR. Successful examples of one ‘hard’ and one ‘soft’ ODR mechanism are reviewed. The authors conclude with considering the implications for EU ODR policy in the short, medium and long term.

Accreditation in European Health Care

In the past 15 years many countries, with widely differing health systems, have established national accreditation programs. A European survey report on accreditation, which includes data and updates from 2003 that were submitted between January and October 2004, is summarized. A one-page questionnaire was circulated, with the summary of the 2002 survey, in February 2004 to known contacts in 44 of the larger states in the European Region of the World Health Organization. Combining the surveys of 2000, 2002, and 2004, responses were received from 36 of the 44 larger countries of the European Region from which information was sought. The number of national accreditation programs for health services has continued to grow since the mid-1990s. By 2004, 26 programs were active or in development in 18 countries. The "English-speaking" model of North America remains the leading influence; however, newer programs are increasingly influenced by other models. Governmental programs are more likely to publish findings of accreditation assessments, and more recent programs are more likely to make results public. Accreditation programs are being set up more frequently in Europe than anywhere else; the trend is from voluntary, confidential, and self-financed organizational development toward benign but transparent regulation of stakeholders, governmental support, and public funding. Programs vary widely, yet patient and staff mobility, cross-border purchasing, freedom of trade, and protection of public safety and patients' rights imply the need for a common approach to definition, assessment, and improvement of standards in health care.

Potential consequences from possible changes to Nordic retail alcohol monopolies resulting from European Union membership.

This paper projects the consequences of modifying or eliminating the current national alcohol retail monopolies in Sweden, Norway and Finland as a possible result of those countries' membership in the European Union (EU). First, the authors project absolute alcohol consumption in each country based on different possible changes in alcohol price and availability. Then they predict the future levels of alcohol-related problems likely to result from increased per capita alcohol consumption (Sweden and Norway only). All of the scenarios examined in this paper are expected to lead to increases in per capita alcohol consumption. The smallest increase in consumption would result from a partial elimination of the current monopoly and a modest reduction in alcohol prices. In that case, projected per capita consumption in Sweden for inhabitants 15 years and older would rise from 6.3 to 9.3 litres; in Norway, from 4.7 to 6.7 litres; and in Finland, from 8.4 to 11.1 litres. The greatest projected increase in consumption would result from a complete elimination of the state monopolies such that all beer, wine and spirits were sold in food shops, grocery stores and gasoline stations, along with a substantial drop in alcohol prices as a result of private competition within each country and increased cross-border alcohol purchases. That scenario would result in projected per capita consumption of 12.7 litres in Sweden, 11.1 litres in Norway and 13.7 litres in Finland. The authors project that a 1-litre increase in consumption would result in a 9.5% increase in total alcohol-related mortality in Sweden and a 9.7% increase in Norway. Further, alcohol-related assaults would increase by 9% in Sweden and 9.6% in Norway. A 5-litre increase in consumption would result in a 62% increase in alcohol-related mortality in Sweden and a 60% increase in Norway, and a 57% increase in alcohol-involved assaults in both countries.

Pushing the Borders: The Moral Dilemma of International Internet Pharmacies

W ^hen we think about drug access issues, typically we turn to the appalling lack of access in developing countries where, as the World Health Organization reports, one-third of the population does not have regular access to needed medicines. But the issue of drug access has also recently become a politically charged topic in the United States, the world's most lucrative pharmaceutical market. There have been several populist initiatives to buy pharmaceuticals over the border. Unfortunately, although these initiatives are well intentioned, once the rhetoric is cast aside and the purchases are analyzed impartially, it becomes evident that they are an unfair solution for the long term. Some people would benefit from them, but many more would pay. In the United States, pharmaceutical firms price their products at whatever the market will bear, atypical for an OECD country, resulting in inadequate coverage for many people. Moreover, an estimated 35 percent of Medicare beneficiaries lack drug benefits.1 The Congressional Budget Office (CBO) has projected that rising drug prices will continue to assume a large share of seniors' incomes. It also reported that for the lowest income quintile, the projected increase in drug expenditures, measured as a share of after-tax income, is about 25 percent from 2000 to 2013. American consumers are increasingly unable or unwilling to pay these prices and are seeking better government coverage of pharmaceutical products as well as relief from unaffordable medicines. Cross-border pharmaceutical purchases, particularly from Canada, have acquired political currency as a possible solution, and they became even more popular during 2003. Whether or not the recent Medicare reform will offer enough relief from high prescription drug prices for those in need and the middle class is uncertain at best.

Utilization of the Internet by EU and US Service Providers to Facilitate Cross-Border Business

SUMMARY E-commerce is a potent and growing force worldwide, though little attention has been addressed to conducting such business across borders. This paper reports research on the internationalization of websites to accommodate and encourage cross-border sales. Content analysis of 100 websites was conducted to determine utilization of five website traits that facilitate cross-border purchases. A comparison between European Union and United States service providers' websites indicates Europeans offer more of these features. In addition, differences are found among the industries examined and among the specific features utilized.

Slip Sliding Away? The Changing Politics of European Car Distribution

This paper examines the development of EU regulations in the car distribution sector. In the span of approximately fifteen years, the sector has shifted from being regarded by its critics as being one of the most protected havens of European industry to one faced with open competition. The paper claims that the inability of the car industry to resist liberalization in this sector is related to several factors. First, there was declining support from member states for their national producers, in part explained by global shifts in ownership and production which rendered concepts of “national producer” problematic. Second, technological changes combined with the impact of globalization on in the industry undermined the case for a link between sales and service of cars. Third, DG competition, led by Mario Monti, wished to push through the ability of consumers to make cross-border purchases of cars. Fourth, a more general logic embedded in the Single European Market programme (SEM) had led to several decisions to prosecute EU car producers for infringing SEM rules and thereby undermining the ability of EU member states to protect their “national producers.” This has implications more broadly: will increasing globalization of industrial ownership further undermine the state-firm nexus in the EU, thus reducing the propensity of national industries to resist liberalization? In this context, will member states be prepared to give the EU Commission a freer hand in forcing through liberalization in the remaining sectors that remain problematic?

Slip sliding away? The changing politics of European car distribution

This paper examines the development of EU regulations in the car distribution sector. In the span of approximately fifteen years, the sector has shifted from being regarded by its critics as being one of the most protected havens of European industry to one faced with open competition. The paper claims that the inability of the car industry to resist liberalization in this sector is related to several factors. First, there was declining support from member states for their national producers, in part explained by global shifts in ownership and production which rendered concepts of “national producer” problematic. Second, technological changes combined with the impact of globalization on in the industry undermined the case for a link between sales and service of cars. Third, DG competition, led by Mario Monti, wished to push through the ability of consumers to make cross-border purchases of cars. Fourth, a more general logic embedded in the Single European Market programme (SEM) had led to several decision...

Self-medication practices in two California Mexican communities.

Although social scientists have taken up the study of medication use in both developing and developed nations, the medication practices of immigrants remain largely unstudied. In this study, qualitative research was employed in order to describe and compare self-medication practices in two California Mexican immigrant groups: families living along the border near Tijuana, Mexico, and migrant farm worker families residing in illegal encampments and substandard housing in San Diego's North County. Medication and health seeking practices were found to vary according to the specific political-economic, sociocultural, and geographic contexts in which different subpopulations of California Mexicans live. The California-Mexico border area was examined as an important context for considering self-medication behaviors, since it permits border-crossing into Tijuana for the purpose of buying Mexican pharmaceuticals at low cost without a prescription. The popularity of injections among California Mexicans and the cross-border purchasing of injectable antibiotics and vitamins are discussed as issues of particular relevance for immigrants living along the border.

Crossing the Border: Does Commodity Tax Evasion Reduce Welfare and Can Enforcement Improve It?

This paper compares discrete equilibria in which consumers do and do not evade commodity taxes by making cross-border purchases. When the government faces a revenue requirement, the comparison shows that border crossing reduces welfare if resources wasted by evasion exceed the benefit of consumption changes, where these changes reflect lower prices across the border and induced changes in domestic tax rates. Enforcement reduces welfare if administrative and uncertainty costs outweigh the benefits of consumption changes and the reduction in resource costs. The analysis shows that the welfare effect of evasion depends on how well designed the tax system is and how effective enforcement resources are in deterring border crossing.

Privatization, price and cross-border liquor purchases.

Self-report survey data were used to investigate the effects of liquor sales privatization on cross-border liquor purchases. A state survey sample representing the Iowa age 18+ noninstitutionalized population was interviewed in April 1989, some 25 months after retail spirits sales were privatized. Despite a privatization induced 6.1% increase in retail liquor prices, there was little, if any, change in the self-reported amount of liquor purchased outside the state of Iowa.