EconPapers    
Economics at your fingertips  
 

Limited tax capacity and the optimal taxation of firms

Marcelo Arbex () and Enlinson Mattos ()

No 539, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: Limited tax capacity creates evasion opportunities that weakens the production efficiency argument. Motivated by the SIMPLES tax reform in Brazil that led to heterogeneous responses on revenues and production costs of upstream versus downstream informal firms, we characterize the optimal taxation of firms in a limited tax capacity economy to compare with the optimal value-added and turnover taxes. We show that the elasticities of misreported sales and purchase gaps to policy instruments are behavioral statistics that complement the traditional Diamond and Mirrlees (1971a)’s mechanical effect of taxation. Numerical results suggest turnover taxes can be welfare enhancing vis-`a-vis a value-added system.

Date: 2020-11
New Economics Papers: this item is included in nep-pbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://bibliotecadigital.fgv.br/dspace/bitstream/1 ... nlinson%20Mattos.pdf (application/pdf)

Related works:
Working Paper: Limited Tax Capacity and the Optimal Taxation of Firms (2020) Downloads
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:fgv:eesptd:539

Access Statistics for this paper

More papers in Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().

 
Page updated 2021-10-16
Handle: RePEc:fgv:eesptd:539