Measuring Tax Efficiency
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 Copenhagen Business School, Department of Economics in its series Working Papers with number 05-2004.
Length: 31 pages
Date of creation: 30 Aug 2006
Date of revision:
Contact details of provider:
Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 26 65
Web page: http://www.cbs.dk/departments/econ/
More information through EDIRC
Tax optimality index; excess burden; distance function;
Find related papers by JEL classification:
- 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-ACC-2006-09-03 (Accounting & Auditing)
- NEP-ALL-2006-09-03 (All new papers)
- NEP-PBE-2006-09-03 (Public Economics)
- NEP-PUB-2006-09-03 (Public Finance)
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