Tax-tariff reform with costs of tax administration

Knud Munk

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: As is broadly recognized, the straightforward application of the Diamond-Mirrlees (1971) production efficiency theorem implies that when lump-sum taxation is not available, then it is optimal for the government in a small open economy to rely on taxes on the net demand of households rather than on border taxes to finance its resource requirements. However, the theorem does not hold when taxation is associated with administrative costs. The present paper explores the implications for optimal taxation and for desirable directions of tax-tariff reform in countries at different levels of economic development taking into account the costs of tax administration. The paper lends support to and clarifies the reasons for the criticism by Emran and Stiglitz (2003, 2005) of the IMF and the World Bank's recommendation to developing countries to adopt VAT to replace border taxes.

Keywords: Optimal taxation; optimal trade policy; VAT; tax-tariff reform; costs of tax administration; informal sector; developing countries (search for similar items in EconPapers)
JEL-codes: F11 F13 H21 (search for similar items in EconPapers)
Pages: 20
Date: 2005-12-15
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://repec.econ.au.dk/repec/afn/wp/05/wp05_21.pdf (application/pdf)

Related works:
Working Paper: Tax-Tariff Reform with Costs of Tax Administrations (2010)
Journal Article: Tax-tariff reform with costs of tax administration (2008)
Working Paper: Tax-tariff reform with costs of tax administration (2006)
Working Paper: Tax-tariff reform with costs of tax administration* (2006)
Working Paper: Tax-Tariff Reform with costs of Tax Administration (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2005-21

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().