The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags

16 Pages Posted: 15 Feb 2006

See all articles by Avinash Dixit

Avinash Dixit

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

Date Written: September 1990

Abstract

When there are collection lags in the tax system, inflation reduces the real revenues. This is often offered as an argument for less reliance on the inflation tax. But the optimal rates of other taxes should also be reconsidered in the light of collection lags. When this is done, the focus shifts from the revenues (which can be recouped by changing the rates of these taxes), to the associated costs of collection. In a benchmark case where the average costs of collection are constant, the optimal inflation tax is independent of the collection lag.

JEL Classification: 023, 321

Suggested Citation

Dixit, Avinash K., The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags (September 1990). IMF Working Paper No. 90/87, Available at SSRN: https://ssrn.com/abstract=885035

Avinash K. Dixit (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States
609-258-4000 (Phone)
609-258-6419 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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