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Optimal grouping of commodities for indirect taxation

  • Belan, Pascal
  • Gauthier, Stéphane
  • Laroque, Guy

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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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 7 (July)
Pages: 1738-1750

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:7:p:1738-1750
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. 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.
  2. Belan, Pascal & Gauthier, Stephane, 2006. "Optimal indirect taxation with a restricted number of tax rates," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1201-1213, August.
  3. Emmanuel Saez, 2002. "Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run," NBER Working Papers 8833, National Bureau of Economic Research, Inc.
  4. Saez, Emmanuel, 2002. "The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes," Journal of Public Economics, Elsevier, vol. 83(2), pages 217-230, February.
  5. 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).
  6. 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.
  7. 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.
  8. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  9. 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.
  10. Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers 2004-23, Centre de Recherche en Economie et Statistique.
  11. Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
  12. Pascal Belan & Stéphane Gauthier, 2004. "Optimal commodity grouping in a partial equilibrium framework," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00106895, HAL.
  13. Gordon, James P. F., 1989. "Tax reform via commodity grouping," Journal of Public Economics, Elsevier, vol. 39(1), pages 67-81, June.
  14. Kaplow, Louis, 2006. "On the undesirability of commodity taxation even when income taxation is not optimal," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1235-1250, August.
  15. Pascal Belan & Stéphane Gauthier, 2003. "Optimal Commodity Grouping in a Partial Equilibrium Framework," Working Papers 2003-28, Centre de Recherche en Economie et Statistique.
  16. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
  17. 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.
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