With non−competitive firms, a turnover tax can dominate the VAT

In an example with monopoly final and intermediate goods firms and substitutable primary and intermediate inputs, it is shown that there exist turnover taxes that yield more revenue than any feasible value−added tax. Second, simultaneously higher welfare, revenue and output are possible with the turnover tax. I thank Dilip Mookherjee and Kunal Sengupta for comments while this paper was being written and my wife, Sadhna Marwaha, for helping check the algebra and spreadsheet programming. I also thank the National Institute of Public Finance and Policy for supporting an earlier draft of the paper via a visiting faculty position. All errors are mine