Theory and Policy: A Commenton Dixit andon Current Tax Theory

February 1, 1992

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Format: Chicago

Vito Tanzi. Theory and Policy: A Commenton Dixit andon Current Tax Theory, (USA: International Monetary Fund, 1992) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In a recent paper Professor Dixit criticized the argument that when collection lags characterize tax systems, recourse to inflationary finance should be minimized. He argued that, in such case, rather than minimizing recourse to inflationary finance, the rates of the commodity taxes should be adjusted to maintain them at an optimal level and, thus, to minimize welfare costs. This paper shows that the requirements for following Dixit’s policy prescription are almost impossible to meet. The paper argues that more attention should be paid by tax theorists to the constraints under which tax reforms are made.

Subject: Consumption taxes, Inflation, Prices, Taxes

Keywords: Collection cost, Consumption taxes, Cost, Dixit, Global, Implicit recommendation, Inflation, Inflation rate, Inflation tax, Policy option, Rate of inflation, Tax practitioner, Tax rate, Theoretical analysis, WP

Publication Details

Pages:

12
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/015
Stock No:

WPIEA0151992
ISBN:

9781451843170
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 39, No. 4, December 1992.

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