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<p>This paper pioneers the investigation of multinational upstream monopolist's choice between export and foreign direct investment (FDI) entry modes under two distinct commodity tax principles, examining how governments determine their commodity taxation principles. The paper yields several key findings. Firstly, when the upstream monopolist adopts the same entry mode under different tax principles, the welfare level is consistently higher under the destination principle than the origin principle, regardless of the trade costs for upstream and downstream firms. Secondly, when the upstream monopolist opts for the FDI strategy under the origin principle and the export strategy under the destination principle, the latter principle demonstrates higher welfare levels if downstream firms encounter high trade costs. Additionally, when downstream firms face low trade costs, the welfare level is higher (lower) under the destination principle than the origin principle if the upstream monopolist faces low (high) trade costs.</p>

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Multinational upstream firm and commodity tax principle under origin and destination principles

  • 期刊论文

  • 发表日期：

    2025年8月25日

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  • Tsaur-Chin Wu,
  • Chia-Jen Chang,
  • Hsiu-Wei Chang

摘要

This paper pioneers the investigation of multinational upstream monopolist's choice between export and foreign direct investment (FDI) entry modes under two distinct commodity tax principles, examining how governments determine their commodity taxation principles. The paper yields several key findings. Firstly, when the upstream monopolist adopts the same entry mode under different tax principles, the welfare level is consistently higher under the destination principle than the origin principle, regardless of the trade costs for upstream and downstream firms. Secondly, when the upstream monopolist opts for the FDI strategy under the origin principle and the export strategy under the destination principle, the latter principle demonstrates higher welfare levels if downstream firms encounter high trade costs. Additionally, when downstream firms face low trade costs, the welfare level is higher (lower) under the destination principle than the origin principle if the upstream monopolist faces low (high) trade costs.