On commodity tax harmonization and public goods provision

This paper argues that Pareto improvements based on harmonizing tax reforms expressed in terms of the divergence between actual and optimal tax structures and over/under provision of public goods require the use of ‘pseudo‐optimal’ taxes instead of optimal ones. ‘Pseudo‐optimal’ taxes are defined as...

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Bibliographic Details
Published inJournal of public economic theory Vol. 23; no. 6; pp. 1220 - 1227
Main Authors Kotsogiannis, Christos, Lopez‐Garcia, Miguel‐Angel
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.12.2021
Subjects
Economic theory
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Summary:This paper argues that Pareto improvements based on harmonizing tax reforms expressed in terms of the divergence between actual and optimal tax structures and over/under provision of public goods require the use of ‘pseudo‐optimal’ taxes instead of optimal ones. ‘Pseudo‐optimal’ taxes are defined as those obtained using the optimal tax formulas but evaluated at any arbitrary initial tax structure. Within this context the paper reconfirms existing results showing that tax harmonization emerges as a strong policy instrument in achieving a potential Pareto‐improvement.
ISSN:1097-3923
1467-9779
DOI:10.1111/jpet.12535