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Collection Lags and the Optimal Inflation Tax: A Reconsideration

Author

Listed:
  • Alex Mourmouras

    (International Monetary Fund)

  • José A. Tijerina

    (International Monetary Fund)

Abstract

The observation that inflation reduces real revenues when there are lags in tax collection has long been a strong argument against seigniorage. However, with the exception of Dixit, who used a general equilibrium model to reject this argument, the optimal taxation literature has not analyzed how collection lags affect desired tax structures. This paper reexamines the issue using an overlapping generations version of Dixit's model. It is shown that depending on the size of the expenditure ratio and the specification of the collection cost function, lags may increase, leave unchanged, or reduce the desired rate of inflation.

Suggested Citation

  • Alex Mourmouras & José A. Tijerina, 1994. "Collection Lags and the Optimal Inflation Tax: A Reconsideration," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 30-54, March.
    • Handle: RePEc:pal:imfstp:v:41:y:1994:i:1:p:30-54
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    Citations

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    Cited by:

    1. Abbas Alavirad, 2003. "The Effect of Inflation on Government Revenue and Expenditure: The Case of the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 27(4), pages 331-341, December.
    2. José A. Tijerina-Guajardo & José A. Pagán, 2000. "Valued-Added Tax Revenues in Mexico: An Empirical Analysis," Public Finance Review, , vol. 28(6), pages 561-575, November.

    More about this item

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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