Measuring Tax Efficiency: A Tax Optimality Index
AbstractThis Paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. In doing so, we derive a [0; 1] number that reveals immediately how far the current tax configuration is from the optimal one and, thereby, the degree of efficiency of a tax system. We call this number the Tax Optimality Index. We show how the basic method can be altered in order to derive a revenue equivalent uniform tax, which measures the size of the public sector. A numerical example is used to illustrate the method developed.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4566.
Date of creation: Aug 2004
Date of revision:
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Other versions of this item:
- Pascalis Raimondos-Møller & Alan D. Woodland, 2004. "Measuring Tax Efficiency: A Tax Optimality Index," CESifo Working Paper Series 1236, CESifo Group Munich.
- Pascalis Raimondos-Møller & Alan D. Woodland, 2004. "Measuring Tax Efficiency: A Tax Optimality Index," EPRU Working Paper Series 04-08, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
- NEP-PBE-2005-02-13 (Public Economics)
- NEP-PUB-2005-02-13 (Public Finance)
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