Optimal tax base with administrative fixed costs
AbstractThis note characterizes the optimal base for commodity taxation in the presence of administrative fixed costs varying across goods. For low tax rates, the optimal base only comprises commodities whose discouragement index is greater than the ratio of their administrative costs to the tax they yield. An illustration with UK data shows that a category of goods should be taxed only if the revenue generated on this category is at least ten times greater than its administrative fixed cost. The cost imputable to the category of goods taxed at the standard rate would be at most 6 percent of total VAT revenue. The administration cost associated with categories of goods currently tax-free could justify exemption. Copyright Springer Science+Business Media New York 2013
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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 20 (2013)
Issue (Month): 6 (December)
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Web page: http://www.springerlink.com/link.asp?id=102915
Indirect taxation; VAT; Tax base; Administrative costs; H21;
Other versions of this item:
- 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.
- Stéphane Gauthier, 2011. "Optimal Tax Base with Administrative fixed Costs," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00639800, HAL.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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