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A Comparison of Sales Taxes

Author

Listed:
  • Das-Gupta, Arindam
  • Gang, Ira N

Abstract

We describe the simple analytics of the four main types of sales taxes under revenue neutrality: the retail sales tax, the value added tax, a cascading sales tax and a manufacturers' sales tax. The retail sales tax is shown to be equivalent to a value added tax. In order to produce equal revenues these two taxes must be at a higher rate than a cascading tax. However, output under a retail sales tax exceeds that under a cascading sales tax and deadweight losses are lower. The manufacturers' sales tax offers the worst of all worlds: with revenue neutrality the manufacturers' sales tax has a higher tax rate, lower output and greater deadweight loss than all the other taxes.
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Suggested Citation

  • Das-Gupta, Arindam & Gang, Ira N, 1996. "A Comparison of Sales Taxes," Public Finance = Finances publiques, , vol. 51(2), pages 217-225.
    • Handle: RePEc:pfi:pubfin:v:51:y:1996:i:2:p:217-25
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    Cited by:

    1. Watanabe, Satoshi, 2001. "Electronic Commerce and Indirect Taxation," Economic Review, Hitotsubashi University, vol. 52(1), pages 40-51, January.
    2. Marcelo Arbex & Enlinson Mattos, 2015. "Optimal sales tax rebates and tax enforcement consumers," Oxford Economic Papers, Oxford University Press, vol. 67(2), pages 479-493.
    3. Arindam Das-Gupta, 2005. "With non-competitive firms, a turnover tax can dominate the VAT," Economics Bulletin, AccessEcon, vol. 8(9), pages 1-6.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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