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Optimal grouping of commodities for indirect taxation

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  • Belan, Pascal
  • Gauthier, Stéphane
  • Laroque, Guy

Abstract

Indirect taxes contribute to a sizeable part of government revenues around the world. Typically there are few different tax rates, and the goods are partitioned into classes associated with each rate. The present paper studies how to group the goods in these few classes. We take as given the number of tax rates and study the optimal aggregation (or classification) of commodities of the fiscal authority in a second best setup. The results are illustrated on data from the United Kingdom.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 7 (July)
Pages: 1738-1750

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:7:p:1738-1750

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Saez, Emmanuel, 2002. "The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes," Journal of Public Economics, Elsevier, vol. 83(2), pages 217-230, February.
  2. Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
  3. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty and optimal taxation: In defense of commodity taxes," Journal of Public Economics, Elsevier, vol. 56(2), pages 291-310, February.
  4. Blundell & Robin, 1999. "Estimation in large and disaggregated demand systems : an estimator for conditionally linear systems," Working Papers 156380, Institut National de la Recherche Agronomique, France.
  5. Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1994. "Towards a theory of the direct-indirect tax mix," Journal of Public Economics, Elsevier, vol. 55(1), pages 71-88, September.
  6. Belan, Pascal & Gauthier, Stephane, 2006. "Optimal indirect taxation with a restricted number of tax rates," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1201-1213, August.
  7. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
  8. Louis Kaplow, 2004. "On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal," NBER Working Papers 10407, National Bureau of Economic Research, Inc.
  9. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Laroque, Guy R., 2005. "Indirect taxation is superfluous under separability and taste homogeneity: a simple proof," Economics Letters, Elsevier, vol. 87(1), pages 141-144, April.
  11. Gordon, James P. F., 1989. "Tax reform via commodity grouping," Journal of Public Economics, Elsevier, vol. 39(1), pages 67-81, June.
  12. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
  13. Belan, Pascal & Gauthier, Stephane, 2004. "Optimal commodity grouping in a partial equilibrium framework," Economics Letters, Elsevier, vol. 83(1), pages 49-54, April.
  14. Emmanuel Saez, 2002. "Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run," NBER Working Papers 8833, National Bureau of Economic Research, Inc.
  15. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  16. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
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Cited by:
  1. repec:hal:cesptp:halshs-00639800 is not listed on IDEAS
  2. Jean Lim & Carolina Rodríguez-Zamora, 2010. "The Optimal Tax Rule in the Presence of Time Use," Working Papers 2010-05, Banco de México.
  3. Julien Daubanes & Pierre Lasserre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," CER-ETH Economics working paper series 11/151, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  4. Stéphane Gauthier, 2011. "Optimal Tax Base with Administrative Fixed Costs," Documents de travail du Centre d'Economie de la Sorbonne 11060, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  5. Yann Braouezec, 2013. "The Welfare Effects of Regulating the Number of Market Segments," Working Papers 2013-ECO-11, IESEG School of Management.

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