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Optimal grouping of commodities for indirect taxation

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Author Info

  • Pascal Belan

    ()
    (LEN - Laboratoire d'Economie de Nantes - Université de Nantes)

  • Stéphane Gauthier

    (ENSAE - École Nationale de la Statistique et de l'Administration Économique - ENSAE ParisTech, CREST-INSEE - Centre de Recherche en Economie et en Statistique - Institut national de la statistique et des études économiques (INSEE))

  • Guy Laroque

    ()
    (CREST-INSEE - Centre de Recherche en Economie et en Statistique - Institut national de la statistique et des études économiques (INSEE), Department of Economics - University College London)

Abstract

Indirect taxes contribute to a sizeable part of government revenues around the world. Typically there are few different tax rates, and the goods are partitioned into classes associated with each rate. The present paper studies how to group the goods in these few classes. We take as given the number of tax rates and study the optimal aggregation (or classification) of commodities of the fiscal authority in a second best setup. The results are illustrated on data from the United Kingdom.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00731151.

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Date of creation: Jul 2008
Date of revision:
Publication status: Published, Journal of Public Economics, 2008, 92, 7, 1738-1750
Handle: RePEc:hal:journl:hal-00731151

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00731151
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Related research

Keywords: Indirect tax; Ramsey; Aggregation;

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References

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  1. Saez, Emmanuel, 2004. "Direct or indirect tax instruments for redistribution: short-run versus long-run," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 503-518, March.
  2. Joseph E. Stiglitz, 1981. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers 0632, National Bureau of Economic Research, Inc.
  3. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
  5. Emmanuel Saez, 2000. "The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes," NBER Working Papers 8029, National Bureau of Economic Research, Inc.
  6. Pascal Belan & Stéphane Gauthier, 2003. "Optimal Commodity Grouping in a Partial Equilibrium Framework," Working Papers 2003-28, Centre de Recherche en Economie et Statistique.
  7. Louis Kaplow, 2004. "On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal," NBER Working Papers 10407, National Bureau of Economic Research, Inc.
  8. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty and optimal taxation: In defense of commodity taxes," Journal of Public Economics, Elsevier, vol. 56(2), pages 291-310, February.
  9. Laroque, Guy R., 2005. "Indirect taxation is superfluous under separability and taste homogeneity: a simple proof," Economics Letters, Elsevier, vol. 87(1), pages 141-144, April.
  10. Pascal Belan & Stéphane Gauthier, 2006. "Optimal indirect taxation with a restricted number of tax rates," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00106898, HAL.
  11. Richard Blundell & Jean-Marc Robin, 1999. "Estimation in large and disaggregated demand systems: an estimator for conditionally linear systems," Working Papers 249982, Institut National de la Recherche Agronomique, France.
  12. Boadway, R. & Marchand, M. & Pestieau, P., . "Towards a theory of the direct-indirect tax mix," CORE Discussion Papers RP -1110, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
  14. Gordon, James P. F., 1989. "Tax reform via commodity grouping," Journal of Public Economics, Elsevier, vol. 39(1), pages 67-81, June.
  15. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  16. Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
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Citations

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Cited by:
  1. Jean Lim & Carolina Rodríguez-Zamora, 2010. "The Optimal Tax Rule in the Presence of Time Use," Working Papers 2010-05, Banco de México.
  2. Yann Braouezec, 2013. "The Welfare Effects of Regulating the Number of Market Segments," Working Papers 2013-ECO-11, IESEG School of Management.
  3. Julien Daubanes & Pierre Lasserre, 2012. "Optimum Commodity Taxation with a Non-Renewable Resource," CIRANO Working Papers 2012s-04, CIRANO.
  4. Stéphane Gauthier, 2013. "Optimal tax base with administrative fixed costs," International Tax and Public Finance, Springer, vol. 20(6), pages 961-973, December.

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