Measuring Tax Efficiency: A Tax Optimality Index

Pascalis Raimondos-Møller; Alan D. Woodland

Measuring Tax Efficiency: A Tax Optimality Index

Pascalis Raimondos-Møller, Alan D. Woodland

Department of Economics

Research output: Working paper › Research

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Abstract

This paper introduces an index of tax optimality thatmeasures the distance of some current tax structure from the optimal taxstructure in the presence of public goods. In doing so, we derive a [0, 1]number that reveals immediately how far the current tax configurationis from the optimal one and, thereby, the degree of efficiency of a taxsystem. We call this number the Tax Optimality Index. We show howthe basic method can be altered in order to derive a revenue equivalentuniform tax, which measures the size of the public sector. A numericalexample is used to illustrate the method developed.JEL Code: H21, H41.Keywords: Tax optimality index, excess burden, distance function.Authors Affiliations: Raimondos-Møller: Copenhagen Business School, CEPR,CESifo, and EPRU. Woodland: University of Sydney.

Original language	English
Place of Publication	København
Number of pages	31
ISBN (Electronic)	x656444451
Publication status	Published - 2004

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title = "Measuring Tax Efficiency: A Tax Optimality Index",

abstract = "This paper introduces an index of tax optimality thatmeasures the distance of some current tax structure from the optimal taxstructure in the presence of public goods. In doing so, we derive a [0, 1]number that reveals immediately how far the current tax configurationis from the optimal one and, thereby, the degree of efficiency of a taxsystem. We call this number the Tax Optimality Index. We show howthe basic method can be altered in order to derive a revenue equivalentuniform tax, which measures the size of the public sector. A numericalexample is used to illustrate the method developed.JEL Code: H21, H41.Keywords: Tax optimality index, excess burden, distance function.Authors Affiliations: Raimondos-M{\o}ller: Copenhagen Business School, CEPR,CESifo, and EPRU. Woodland: University of Sydney.",

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note = "Generelle noter: Dette paper er desuden udgivet som CEPR Discussion Paper no. 4566 og som CEDifo Working Paper no. 1236. Paperet er endvidere pr{\ae}senteret p{\aa} henholdsvis Area Conference on Public Sector Economics, CESif{\"o}. M{\"u}nchen 7-9 maj 2004 og IIPF Annual Congress, Milano 23-26 august 2004",

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N1 - Generelle noter: Dette paper er desuden udgivet som CEPR Discussion Paper no. 4566 og som CEDifo Working Paper no. 1236. Paperet er endvidere præsenteret på henholdsvis Area Conference on Public Sector Economics, CESifö. München 7-9 maj 2004 og IIPF Annual Congress, Milano 23-26 august 2004

PY - 2004

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N2 - This paper introduces an index of tax optimality thatmeasures the distance of some current tax structure from the optimal taxstructure in the presence of public goods. In doing so, we derive a [0, 1]number that reveals immediately how far the current tax configurationis from the optimal one and, thereby, the degree of efficiency of a taxsystem. We call this number the Tax Optimality Index. We show howthe basic method can be altered in order to derive a revenue equivalentuniform tax, which measures the size of the public sector. A numericalexample is used to illustrate the method developed.JEL Code: H21, H41.Keywords: Tax optimality index, excess burden, distance function.Authors Affiliations: Raimondos-Møller: Copenhagen Business School, CEPR,CESifo, and EPRU. Woodland: University of Sydney.

AB - This paper introduces an index of tax optimality thatmeasures the distance of some current tax structure from the optimal taxstructure in the presence of public goods. In doing so, we derive a [0, 1]number that reveals immediately how far the current tax configurationis from the optimal one and, thereby, the degree of efficiency of a taxsystem. We call this number the Tax Optimality Index. We show howthe basic method can be altered in order to derive a revenue equivalentuniform tax, which measures the size of the public sector. A numericalexample is used to illustrate the method developed.JEL Code: H21, H41.Keywords: Tax optimality index, excess burden, distance function.Authors Affiliations: Raimondos-Møller: Copenhagen Business School, CEPR,CESifo, and EPRU. Woodland: University of Sydney.

KW - Den offentlige sektor

KW - Skattepolitik

KW - Velfærdsøkonomi

KW - Skatteteori

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CY - København

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