Optimal Sales Tax Rebates and Tax Enforcement Consumers

Marcelo Arbex and Enlinson Mattos

No 1302, Working Papers from University of Windsor, Department of Economics

Abstract: We study an optimal commodity taxation problem and show that consumers have an important role as tax enforcers. Firms evade taxes by not issuing sales receipts. Requesting receipts is costly for buyers but forces ?rms to remit taxes to the government. To compensate buyers, the government o¤ers a tax rebate, which has a non-trivial income e¤ect and modi?es the traditional "Ramsey equation". Tax-enforcement policies a¤ect buyers?allocations directly and via the standard changes in the good?s price. The optimal policies depend on buyers? auditing and ?rms?concealment technologies. Welfare is higher if consumer auditing is the only tax enforcement policy.

Keywords: Optimal Taxation; Indirect Tax Evasion; Tax Enforcement and Auditing. (search for similar items in EconPapers)
JEL-codes: E62 H21 H26 K42 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-04
New Economics Papers: this item is included in nep-iue, nep-mac, nep-pbe and nep-pub
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http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1302.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Optimal sales tax rebates and tax enforcement consumers (2015)
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