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

September 1, 1990

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Avinash K Dixit. The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags, (USA: International Monetary Fund, 1990) accessed November 21, 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

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.

Subject: Consumption, Consumption taxes, Inflation, Revenue administration, Tax collection

Keywords: Average cost, Inflation tax, WP

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/087
Stock No:

WPIEA0871990
ISBN:

9781451953169
ISSN:

1018-5941

Notes

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

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