THE IMPACTS OF DEMAND AND SUPPLY ELASTICITIES ON GAMBLING TAX CHOICES

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Published: Mar 25, 2014
DOI: https://doi.org/10.5750/jgbe.v8i1.694
Keywords:
Casino taxes demand and supply elasticities market structure Macao Las Vegas

Main Article Content

Xinhua Gu
Pui Sun Tam

Abstract

This study shows that whether a tax is heavy for local casinos in terms of economy-wide efficiency hinges on how much of the tax can be passed on to tourists. The division of the tax burden between casinos and tourists is affected by the relative elasticity of demand versus supply and tourists’ income factors. We find that gaming tax incidence is robust across different market structures. An uncompetitive casino industry may be more favorable for tax efficiency than its competitive counterpart. Policy choice between tax rates is observed to rest on the economic incidence of a statutory tax. We provide the economic rationale behind why a high tax is imposed inMacaoand a lenient tax is adopted inLas Vegas.

Article Details

Issue
Vol. 8 No. 1 (2014)
Section
Articles

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