Inefficient Taxation of Sin Goods

Giovanni Immordino, Anna Maria Menichini and Maria Grazia Romano ()
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Maria Grazia Romano: Università di Salerno and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Within an O. Donoghue and Rabin (2006) style model, we study the optimal sin taxes that a government wants to implement when consumers are time-inconsistent, and taxation is inefficient in terms of administrative, collection and compliance costs. We find that, if the inefficiency of taxation is not too large, the optimal tax is positive and it may be higher or lower than the first best depending on the elasticity of demand with respect to taxation. Finally, the extent of the distortion depends on the degree of inefficiency of taxation.

Keywords: Hyperbolic preferences; Taxation; Sin goods (search for similar items in EconPapers)
JEL-codes: D03 H21 H31 (search for similar items in EconPapers)
Date: 2015-09-16
New Economics Papers: this item is included in nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:412

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