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Industry-Specific Income Taxes

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  • Myles, Gareth D.

Abstract

From 1966 until 1973 the U.K. government levied the Selective Employment Tax which took the form of a weekly tax upon employees in service industries. By moving beyond competitive, constant returns models, the paper reconsiders the case for such industry-specific employment taxes. It is shown that the taxes are not justified by decreasing returns to scale even when profit taxation is non-optimal. In contrast, when imperfect competition is considered industry-specific income taxes become an integral part of an optimal tax system. Optimal tax rules are derived for an imperfectly competitive economy and the determinants of relative tax rates are investigated.

Suggested Citation

  • Myles, Gareth D., 1989. "Industry-Specific Income Taxes," Economic Research Papers 268368, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:268368
    DOI: 10.22004/ag.econ.268368
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    References listed on IDEAS

    as
    1. Myles, Gareth D, 1989. "Imperfect Competition and the Taxation of Intermediate Goods," Public Finance = Finances publiques, , vol. 44(1), pages 62-74.
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    3. J. A. Mirrlees, 1972. "On Producer Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 105-111.
    4. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    5. repec:bla:scandj:v:80:y:1978:i:1:p:1-19 is not listed on IDEAS
    6. Partha Dasgupta & Joseph Stiglitz, 1972. "On Optimal Taxation and Public Production," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 87-103.
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    Cited by:

    1. Aled Ab Iorwerth & John Whalley, 1998. "Meals on Wheels: Restaurant and Home Meal Production and the Exemption of Food from Sales and Value Added Taxes," NBER Working Papers 6653, National Bureau of Economic Research, Inc.

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