Social and Behavioral Sciences Commons^™

The Effect Of Joint-Product Export Smuggling On Export Tax Policy, Scott Fausti

Economics Staff Paper Series

This paper analyzes the effect of joint-product export smuggling on the revenue-maximizing export tax rate and tax revenue collection under the small country assumption. The results indicate that the effect of introducing joint product export smuggling is dependent on whether legal and illegal exports are considered a substitutable or complementary activity for the exporting firm. The results of the model are applied to the issue of cigarette smuggling in the United States. The paper concludes that if legal and illegal interstate trade in cigarettes are substitutable activities for firms in the wholesale and retail tobacco industry, then states levying relatively …