Sales Tax: Specific or Ad Valorem Tax for a Non-renewable Resource?
AbstractThis paper shows that for a time-independent specific tax and a time-independent ad valorem tax that induce the same competitive equilibrium in the Hotelling model of resource extraction, the ad valorem tax yields a higher level of discounted tax revenues than the specific tax. Moreover, given the same level of discounted tax revenues, the ad valorem tax also yields a higher level of social welfare. Finally, for the time-dependent schedules of optimal ad valorem tax and optimal specific tax, we show that when appropriately set, they are equivalent in implementing the dynamic social optimum and providing the same discounted tax revenues.
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Bibliographic InfoPaper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 03.
Length: 13 pages
Date of creation: 2009
Date of revision:
Non-renewable Resources; Ad Valorem Tax; Specific Tax; Welfare;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-31 (All new papers)
- NEP-ENE-2009-01-31 (Energy Economics)
- NEP-ENV-2009-01-31 (Environmental Economics)
- NEP-PUB-2009-01-31 (Public Finance)
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