The Effect of Cross-Border Shopping on Commodity Tax Revenue: Results from a Natural Experiment

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 Classification: F15, H20, L81

Suggested Citation: Suggested Citation

Friberg, Richard and Halseth, Emil Mathias Strøm and Steen, Frode and Ulsaker, Simen A., The Effect of Cross-Border Shopping on Commodity Tax Revenue: Results from a Natural Experiment (June 20, 2022). NHH Dept. of Economics Discussion Paper No. 09, 2022, Available at SSRN: https://ssrn.com/abstract=4142274 or http://dx.doi.org/10.2139/ssrn.4142274