IMF Working Papers

Distortionary Taxation and the Debt Laffer Curve

By Aasim M. Husain

January 1, 1992

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Format: Chicago

Aasim M. Husain Distortionary Taxation and the Debt Laffer Curve, (USA: International Monetary Fund, 1992) accessed October 6, 2024
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

This paper highlights the importance of the role of the domestic tax system in determining the economic consequences of an external debt overhang. A simple taxation scheme is specified and it is shown that a country can be on the “wrong side” of its debt Laffer curve only if it is on the wrong side of its tax Laffer curve. The analysis indicates that fairly strong, and probably unrealistic, assumptions about the domestic tax system are needed to argue that the investment disincentives associated with the debt overhang are large enough to place a country on the wrong side of its debt Laffer curve.

Subject: Capital outflows, Debt burden, Debt reduction, Tax distortions

Keywords: Laffer curve, WP

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1992/010

  • Stock No:

    WPIEA0101992

  • ISBN:

    9781451926545

  • ISSN:

    1018-5941

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