Optimal indirect taxation with a restricted number of tax rates
AbstractThis paper analyzes the optimal structure of indirect taxation when the number of available tax rates is smaller than the number of taxable commodities. Such a constraint requires to choose the levels of tax rates and the groups of commodities that will be taxed at equal rates (or exempted). In a partial equilibrium framework, with a single agent and a low amount of tax collection, it is shown that the process of allocation of commodities to groups depends on both price elasticities and consumption spendings. Still, the optimal tax structure displays a weak form of the inverse elasticity rule; consumption spendings influence the size of the fiscal base, and may lead to many tax exemptions.
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Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00106898.
Date of creation: Aug 2006
Date of revision:
Publication status: Published, Journal of Public Economics, 2006, 90, 6-7, 1201-1213
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Indirect taxation; Commodity grouping; Exemptions;
Other versions of this item:
- Belan, Pascal & Gauthier, Stephane, 2006. "Optimal indirect taxation with a restricted number of tax rates," Journal of Public Economics, Elsevier, Elsevier, vol. 90(6-7), pages 1201-1213, August.
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