Tax-tariff reform with costs of tax administration*

Knud Munk

No 331504, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: As is broadly recognized, the straightforward application of the DiamondMirrlees (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 clarifies the reasons for, and lends support to, the criticism by Emran and Stiglitz (2005) of the IMF and the World Bank's recommendation to developing countries to adopt VAT to replace border taxes.

Keywords: Public Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 19
Date: 2006
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https://ageconsearch.umn.edu/record/331504/files/2490.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 (2005)
Working Paper: Tax-Tariff Reform with costs of Tax Administration (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331504

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