The Case for Earmarked Taxes: Theory and an Example

44 Pages Posted: 15 Feb 2006

See all articles by Ranjit Teja

Ranjit Teja

affiliation not provided to SSRN

Date Written: February 18, 1988

Abstract

The earmarking (or setting aside) of revenues from various taxes for specific types of expenditure is a much maligned fiscal practice. The paper examines a number of theoretical arguments and institutional circumstances under which earmarking (even widespread earmarking) may be welfare enhancing. The paper also questions the criticism that earmarking seriously erodes budgetary efficiency, and draws on the experience of Colombia to demonstrate that the worst fears of critics do not necessarily come to pass.

JEL Classification: 3220, 3230

Suggested Citation

Teja, Ranjit, The Case for Earmarked Taxes: Theory and an Example (February 18, 1988). IMF Working Paper No. 88/18, Available at SSRN: https://ssrn.com/abstract=884625

Ranjit Teja (Contact Author)

affiliation not provided to SSRN

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