Measuring tax efficiency: A tax optimality index

Raimondos-Møller, Pascalis & Woodland, Alan D. (2006) Measuring tax efficiency: A tax optimality index. Journal of Public Economics, 90(10-11), pp. 1903-1922.

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Abstract

This paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. This index is defined on the [0, 1] interval and measures the proportion of the optimal tax rates that will achieve the same welfare outcome as some arbitrarily given initial tax structure. We call this number the Tax Optimality Index. We also show how the basic methodology can be altered to derive a revenue equivalent uniform tax, which measures the tax burden implied by the public sector. A numerical example is used to illustrate the method developed, and extensions of the analysis to handle models with multiple households and nonlinear taxation structures are undertaken.

Impact and interest:

2 citations in Scopus
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1 citations in Web of Science®

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ID Code: 94024
Item Type: Journal Article
Refereed: Yes
Keywords: Tax optimality index; Excess burden of taxation; Tax burden; Distance function
DOI: 10.1016/j.jpubeco.2005.12.003
ISSN: 0047-2727
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2006 Elsevier B.V.
Deposited On: 30 Mar 2016 00:09
Last Modified: 31 Mar 2016 22:06

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