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

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  • Michael S. Michael
  • Sajal Lahiri
  • Panos Hatzipanayotou

Abstract

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.

Suggested Citation

  • Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2013. "Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint," University of Cyprus Working Papers in Economics 03-2013, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:03-2013
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    References listed on IDEAS

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    Cited by:

    1. Evangelos V. Dioikitopoulos & Sugata Ghosh & Eugenia Vella, 2016. "Technological Progress, Time Perception and Environmental Sustainability," Working Papers 2016002, The University of Sheffield, Department of Economics.
    2. Sajal Lahiri & Peri Silva, 2016. "Potential Pareto-Improving Move Toward Most Favored Nation Tariffs," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1086-1104, April.
    3. Nikolaos Vlassis, 2013. "The Welfare Consequences of Pollution-Tax Harmonization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 227-238, October.

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    Keywords

    Indirect tax reforms; Production and consumption generated pollution; Welfare; Government tax revenues;

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