Market structure and the taxation of international trade

The paper compares non-cooperative commodity taxation under the
destination and origin principles under a variety of different
assumptions about market structure. We consider a model of
international duopoly with either quantity or price competition of
firms and either segmented or integrated markets, and a
monopolistic competition model with mobile firms. In each setting
the international spillovers of tax policy are isolated and
evaluated at the Pareto efficient tax rate. The sign of the net
spillover, and thus the direction that commodity tax competition
will take, depends critically on whether lump-sum taxes are
available or commodity taxes must be used to finance the government
budget.