Measuring Tax Efficiency: A Tax Optimality Index

Pascalis Raimondos () and Alan Woodland

No 1236, CESifo Working Paper Series from CESifo

Abstract: This paper introduces an index of tax optimality that measures the distance of a current tax structure from the optimal tax structure in the presence of public goods. In doing so, we derive a [0,1] number that reveals immediately how far the current tax configuration is from the optimal one and, thereby, the degree of efficiency of a tax system. We call this number the Tax Optimality Index. We show how the basic method can be altered in order to derive a revenue equivalent uniform tax, which measures the size of the public sector. A numerical example is used to illustrate the method developed.

Keywords: tax optimality index; excess burden; distance function (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-pbe
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Journal Article: Measuring tax efficiency: A tax optimality index (2006)
Working Paper: Measuring Tax Efficiency: A Tax Optimality Index (2004)
Working Paper: Measuring Tax Efficiency: A Tax Optimality Index (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1236

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