Duty-free reforms – Consumption and tax revenue effects from changing the duty-free arrangement in Norway

Eivind Bjørkås, OFS scholarship recipient 2019

Abstract:

I use the model KONSUM-G to simulate reforms in the duty-free arrangement on alcohol and tobacco in Norway. The model consists of a complete demand system for private consumption in Norway, and was originally developed to evaluate the mechanisms at play when changing the taxation of goods exposed to cross-border shopping, like alcohol, tobacco and food. I extend the model to fit to my purpose of evaluating two different policy reforms. The first reform abolishes duty-free sales in Norway and the second abolishes duty-free sales and sets the import quotas on alcohol and tobacco to zero. The tax revenue effects from the two reform scenarios are estimated to 2,423 and 6,838 million Norwegian kroner (NOK), and overall consumption reduce by 22,000 and 349,000 kilogram tobacco and 196,500 and 913,700 litre pure alcohol.

 

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Published Sep. 1, 2020 11:15 AM - Last modified Sep. 1, 2020 12:58 PM