Theory and Policy: A Commenton Dixit andon Current Tax Theory

Author/Editor:

Vito Tanzi

Publication Date:

February 1, 1992

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.

Series:

Working Paper No. 1992/015

Subject:

Consumption taxes Inflation Prices Taxes

Notes:

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

English

Publication Date:

February 1, 1992

ISBN/ISSN:

9781451843170/1018-5941

Stock No:

WPIEA0151992

Pages:

12

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