Viable Tax Constitutions

University of Warwick Economics Working Paper No. 683

63 Pages Posted: 31 Oct 2010

See all articles by Kimberley A. Scharf

Kimberley A. Scharf

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Carlo Perroni

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 1, 2003

Abstract

Taxation is only sustainable if the general public complies with it. This observation is uncontroversial with tax practitioners but has been ignored by the public finance tradition, which has interpreted tax constitutions as binding contracts by which the power to tax is irretrievably conferred by individuals to government, which can then levy any tax it chooses. However, in the absence of an outside party enforcing con- tracts between members of a group, no arrangement within groups can be considered to be a binding contract, and therefore the power to tax must be sanctioned by individuals on an ongoing basis. In this paper we offer, for the first time, a the- oretical analysis of this fundamental compliance problem associated with taxation, obtaining predictions that in some cases point to a re-interpretation of the theoretical constructions of the public finance tradition while in others call them into question.

Keywords: Self-Enforcing Contract, Taxation, Property Rights, Optimal Taxation, Institutions, Political Mechanisms, Coercion

JEL Classification: H1, H2, H3, H4

Suggested Citation

Scharf, Kimberley and Perroni, Carlo, Viable Tax Constitutions (September 1, 2003). University of Warwick Economics Working Paper No. 683. Available at SSRN: https://ssrn.com/abstract=1700430 or http://dx.doi.org/10.2139/ssrn.1700430

Kimberley Scharf (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
44 24 76523 742 (Phone)
44 24 76523 032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Carlo Perroni

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
44 24 7652 8416 (Phone)
44 24 7652 3032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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