IMPERFECT COMPETITION AND INDIRECT TAX STRUCTURE IN A DEREGULATED TELECOMMUNICATIONS SECTOR

This article uses an applied general equilibrium model to evaluate the relative efficiency of alternative indirect tax structures on the telecommunications sector. The article espe-cially investigates the impact of imperfect competition in the sector’s product market on the efficiency costs of the indirect tax structures. The results show that for a shift from dif-ferential capital taxation to uniform capital taxation, the marginal efficiency gains under imperfect competition are 1 to 2 times larger than the marginal efficiency gains under perfect competition. The results also show that although a differential capital tax has an efficiency advantage over a differential commodity tax under perfect competition under imperfect competition, a differential commodity tax is more efficient