Targeting, Cascading, and Indirect Tax Design

February 28, 2013

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Format: Chicago

Michael Keen. Targeting, Cascading, and Indirect Tax Design, (USA: International Monetary Fund, 2013) 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

This paper addresses two fundamental issues in indirect tax design. It first revisits the case for reduced rates on items especially important to the poor, establishing conditions under which even very crudely targeted spending measures better serve their interests. It then explores the welfare costs from cascading taxes, showing that these may actually be lower the wider the set of inputs that are taxed but, more to the point—and contrary to the common notion that “a low rate on a broad base” is always good tax policy—may plausibly be large even at a low nominal tax rate and with few stages of production.

Subject: Consumption, Consumption taxes, Expenditure, National accounts, Optimal taxation, Tax policy, Taxes, Value-added tax

Keywords: Cascading, Consumption, Consumption taxes, Cost increase, Deadweight loss, Europe, Indirect taxation, Input taxation, Optimal taxation, Rate, Targeting, Tax, Uniform rate VAT, Uniform tax strategy, Unrecovered tax, Value Added Tax, Value-added tax, VAT, WP, Zero rating

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/057
Stock No:

WPIEA2013057
ISBN:

9781475566055
ISSN:

1018-5941

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