Collection Lags and the Optimal Inflation Tax: A Reconsideration
AbstractThe observation that inflation reduces real revenues when there are lags in tax collection has long been a strong argument against seigniorage. However, with the exception of Dixit, who used a general equilibrium model to reject this argument, the optimal taxation literature has not analyzed how collection lags affect desired tax structures. This paper reexamines the issue using an overlapping generations version of Dixit's model. It is shown that depending on the size of the expenditure ratio and the specification of the collection cost function, lags may increase, leave unchanged, or reduce the desired rate of inflation.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.
Volume (Year): 41 (1994)
Issue (Month): 1 (March)
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- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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