Tax Differential and Cross-Border Shopping: Evidence from Singapore

49 Pages Posted: 8 May 2013 Last revised: 2 Mar 2017

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Wenlan Qian

HKU Business School; National University of Singapore - NUS Business School

Weibiao Xu

National University of Singapore (NUS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2017

Abstract

Higher sales tax in the home country relative to a neighboring country creates a huge incentive for consumers who live closer to the border to purchase goods across the border. Using a unique panel dataset of consumer financial transactions, we find that, when facing higher domestic sales tax, consumers close to the border overall spend 3 percent less domestically and in particular 15 percent less in substitutable categories relative to those far from the border. For goods that cannot be purchased across the border (utilities and services) or for which distance is irrelevant (direct marketing), there is no difference in spending behavior. Finally, we also look at store sales and find consistent evidence that domestic sales of stores near the border are lower.

Keywords: Consumption, Spending, Credit Cards, Household Finance, Banks, Discretionary Spending, Fiscal Policy, Tax

JEL Classification: D12, D14, E21, E62, G21, H27, H31

Suggested Citation

Agarwal, Sumit and Chomsisengphet, Souphala and Qian, Wenlan and Xu, Weibiao, Tax Differential and Cross-Border Shopping: Evidence from Singapore (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2262070 or http://dx.doi.org/10.2139/ssrn.2262070

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Wenlan Qian (Contact Author)

HKU Business School ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://sites.google.com/site/wenlanqian/

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

Weibiao Xu

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
254
Abstract Views
2,404
rank
112,875
PlumX Metrics