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

Author/Editor:

Avinash K Dixit

Publication Date:

September 1, 1990

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:

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.

Series:

Working Paper No. 1990/087

Subject:

Notes:

Also published in Staff Papers, Vol. 38, No. 3, September 1991.

English

Publication Date:

September 1, 1990

ISBN/ISSN:

9781451953169/1018-5941

Stock No:

WPIEA0871990

Pages:

16

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