【Abstract】

We use a search-theoretic model to study the impact of internet sales taxes, in both lump-sum and proportional fashions. We show that both forms of taxes, especially the lump-sum tax, have real effects on the online market if the terms of trade are negotiable, while a proportional tax distorts the economy further. We then propose a preferential tax policy and show that it together with a lump-sum internet sales tax can recover the first best. We also give some policy suggestions.

【Keywords】

Internet sales tax, Policy implications

【Authors】

Tiantian Dai and Shenyi Jiang, China Economics Management Academy, Central University of Finance and Economics

Xiangbo Liu, International Monetary Institute, Renmin University of China

Wen Wang, Department of Economics, Duke University