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The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags

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  • Mr. Avinash K Dixit

Abstract

When there are collection lags in the tax system, inflation reduces the real revenues. This is often offered as an argument for less reliance on the inflation tax. But the optimal rates of other taxes should also be reconsidered in the light of collection lags. When this is done, the focus shifts from the revenues (which can be recouped by changing the rates of these taxes), to the associated costs of collection. In a benchmark case where the average costs of collection are constant, the optimal inflation tax is independent of the collection lag.

Suggested Citation

  • Mr. Avinash K Dixit, 1990. "The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags," IMF Working Papers 1990/087, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/087
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    Cited by:

    1. De Fiore, Fiorella & Teles, Pedro, 2003. "The optimal mix of taxes on money, consumption and income," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 871-887, May.
    2. Vegh, Carlos, 1991. "Stopping High Inflation: An Analytical Overview," MPRA Paper 20175, University Library of Munich, Germany.
    3. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470, Elsevier.
    4. Melike Altinkemer, 1994. "Financeable Deficit & Revenues from Monetization : The Case of Turkey," Discussion Papers 9413, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. De Fiore, Fiorella & Teles, Pedro, 2003. "The optimal mix of taxes on money, consumption and income," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 871-887, May.
    6. De Cesare, Luigi & Sportelli, Mario, 2005. "A dynamic IS-LM model with delayed taxation revenues," Chaos, Solitons & Fractals, Elsevier, vol. 25(1), pages 233-244.
    7. Patrick Honohan, 1994. "The Fiscal Approach to Financial Intermediation Policy," Papers WP049, Economic and Social Research Institute (ESRI).
    8. repec:cte:whrepe:wh030602 is not listed on IDEAS
    9. Vegh, Carlos A., 1995. "Inflationary finance and currency substitution in a public finance framework," Journal of International Money and Finance, Elsevier, vol. 14(5), pages 679-693, October.

    More about this item

    Keywords

    WP; average cost; inflation tax;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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