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Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint

  • Michael S. Michael
  • Sajal Lahiri
  • Panos Hatzipanayotou

The literature on indirect tax reforms in pollution-ridden economies is quite limited. This paper, using a general equilibrium model of a perfectly-competitive small open economy with both production and consumption generated pollution, considers the welfare implications of tax reforms that take the structure of consumption and production taxes toward uniformity. Specifically, both in the presence and absence of a binding government revenue constraint, we derive sufficient conditions for welfare improvement in the case where we implement (i) reforms in either production or consumption taxes, and (ii) reforms in both consumption and production taxes.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-13.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 03-2013.

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Length: 26 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:ucy:cypeua:03-2013
Contact details of provider: Web page: http://www.econ.ucy.ac.cy

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