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This paper explores the effect of a tax reform which shifts from specific to value added taxation in a general equilibrium model with imperfect competition (both Cournot and Free Entry Oligopoly). Such tax reform is characterized through a rate of substitution between taxes. This characterization allows us to find those rates of substitution between taxes which have an inflationary (deflationary) effect on price, as well as those rates which generate positive (negative) balanced budget multiplier. Furthermore, the model captures the impact of the tax reform on welfare taking into account both government expenditure and profits, in contrast with the partial equilibrium approach.
