Tax Differential and Cross-Border Shopping: Evidence from Singapore

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

Sumit Agarwal

Georgetown University - Department of Finance

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Wenlan Qian

National University of Singapore - NUS Business School

Weibiao Xu

National University of Singapore (NUS)

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

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (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)

National University of Singapore - NUS Business School ( email )

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

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

Weibiao Xu

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

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