Tax Differential and Cross-Border Shopping: Evidence from Singapore

41 Pages Posted: 19 Sep 2017 Last revised: 12 Apr 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Wenlan Qian

National University of Singapore - NUS Business School

Weibiao Xu

Nankai University - School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 17, 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: Cross Border Shopping, Consumption, Spending, Credit Cards, Household Finance, Banks, Discretionary Spending, Fiscal Policy, Taxation

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 (September 17, 2017). Georgetown McDonough School of Business Research Paper No. 3038550. Available at SSRN: https://ssrn.com/abstract=3038550 or http://dx.doi.org/10.2139/ssrn.3038550

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

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 (Contact Author)

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

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