Optimal Tax Design and Enforcement with an Informal Sector

Robin Boadway and Motohiro Sato

No 273644, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: An optimal commodity tax approach is taken to compare trade taxes and VATs when some commodities are produced informally. Trade taxes apply to all imports and exports, including intermediate goods while the VAT applies only to sales by the formal sector and imports. The VAT can achieve production efficiency within the formal sector, but unlike the trade tax regime, it cannot indirectly tax pure profits. Making the size of the informal sector endogenous in each regime is potentially decisive. The ability of the government to change the size of the informal sector through costly enforcement may also tip the balance in favor of the VAT.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 42
Date: 2008-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/273644/files/qed_wp_1168.pdf (application/pdf)

Related works:
Journal Article: Optimal Tax Design and Enforcement with an Informal Sector (2009)
Working Paper: Optimal Tax Design And Enforcement With An Informal Sector (2008)
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:ags:quedwp:273644

DOI: 10.22004/ag.econ.273644

Access Statistics for this paper

More papers in Queen's Economics Department Working Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().