Theory and Policy: A Comment on Dixit and on Current Tax Theory

12 Pages Posted: 15 Feb 2006

See all articles by Vito Tanzi

Vito Tanzi

International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Date Written: February 1992

Abstract

In a recent paper Professor Dixit criticized the argument that when collection lags characterize tax systems, recourse to inflationary finance should be minimized. He argued that, in such case, rather than minimizing recourse to inflationary finance, the rates of the commodity taxes should be adjusted to maintain them at an optimal level and, thus, to minimize welfare costs. This paper shows that the requirements for following Dixit`s policy prescription are almost impossible to meet. The paper argues that more attention should be paid by tax theorists to the constraints under which tax reforms are made.

JEL Classification: H20, H21, H24

Suggested Citation

Tanzi, Vito, Theory and Policy: A Comment on Dixit and on Current Tax Theory (February 1992). IMF Working Paper No. 92/15, Available at SSRN: https://ssrn.com/abstract=884609

Vito Tanzi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Tax Policy Division Fiscal Affairs Department
Washington, DC 20431
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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