An optimal internet location strategy for markets with different tax rates
Levin, Eric J. and Wright, Robert E.; Wichmann, Thorsten, ed. (2001) An optimal internet location strategy for markets with different tax rates. In: Economics and the Internet. Berlecon Research documents . Berlecon, pp. 5-9. ISBN 9783831122424
Preview |
Text.
Filename: strathprints006929.pdf
Accepted Author Manuscript Download (71kB)| Preview |
Abstract
The traditional view that a high sales tax rate reduces trade by driving a wedge between the purchase and sale price may not apply to internet commerce for two reasons. The first reason is that the sales tax paid by buyers purchasing via the internet is determined by the tax rate in the region of the buyer. The second reason is that a high sales tax may lower the before-tax price if sellers absorb part of the tax. Taken together, this implies that internet distributors may profitably target customers in regions with low tax rates by locating their selling addresses in high tax regions. Consequently the optimal marketing strategy for a global internet distributor may include siting selling locations in regions with high tax rates in order to target customers in regions with low tax rates. An empirical analysis of the European car market suggests that this is more than a remote theoretical possibility by demonstrating that the before-tax prices recommended by manufacturers for new cars are lower in high tax countries.
ORCID iDs
Levin, Eric J. and Wright, Robert E. ORCID: https://orcid.org/0000-0001-8761-1020; Wichmann, Thorsten-
-
Item type: Book Section ID code: 7213 Dates: DateEvent2001PublishedSubjects: Social Sciences > Commerce Department: Strathclyde Business School > Economics Depositing user: Strathprints Administrator Date deposited: 06 Jan 2009 16:42 Last modified: 12 Oct 2024 00:09 URI: https://strathprints.strath.ac.uk/id/eprint/7213