Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 9/2022: The effect of cross-border shopping on commodity tax revenue: Results from a natural experiment

Richard Friberg (), Emil M. Strøm Halseth (), Steen Frode () and Simen A. Ulsaker ()
Additional contact information
Richard Friberg: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Emil M. Strøm Halseth: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Steen Frode: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Simen A. Ulsaker: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: We use grocery data from Norway and COVID-19 border closings to gauge the effect of cross-border shopping on commodity tax revenue. Detailed store-category level data identify differential treatment effects that depend on distance to Swedish stores. Economically significant effects extend to up to two hours’ drive from the border, and even further for prominent cross-border shopping products as beer, cigarettes and soda. Across all products, cross-border shopping decreases tax revenue from VAT by 3.6% at the national level. National commodity tax revenue from carbonated soft drinks (subject to a sugar tax) is reduced by 8.1% and from cigarettes by 11.9%.

Keywords: Cross-border shopping; Commodity taxes; Excise taxes; Tax Competition

JEL-codes: F15; H20; L81

Language: English

81 pages, June 20, 2022

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