IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/4566.html
   My bibliography  Save this paper

Measuring Tax Efficiency: A Tax Optimality Index

Author

Listed:
  • Woodland, Alan D
  • Raimondos, Pascalis

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. In doing so, we derive a [0; 1] number that reveals immediately how far the current tax configuration is from the optimal one and, thereby, the degree of efficiency of a tax system. We call this number the Tax Optimality Index. We show how the basic method can be altered in order to derive a revenue equivalent uniform tax, which measures the size of the public sector. A numerical example is used to illustrate the method developed.

Suggested Citation

  • Woodland, Alan D & Raimondos, Pascalis, 2004. "Measuring Tax Efficiency: A Tax Optimality Index," CEPR Discussion Papers 4566, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4566
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP4566
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. James E. Anderson & J. Peter Neary, 1996. "A New Approach to Evaluating Trade Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 107-125.
    2. Nancy H. Chau & Rolf F”re & Shawna Grosskopf, 2003. "Trade restrictiveness and efficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1079-1095, August.
    3. Kay, John & Keen, Michael, 1988. "Measuring the inefficiences of tax systems," Journal of Public Economics, Elsevier, vol. 35(3), pages 265-287, April.
    4. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    5. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200, April.
    6. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, vol. 94(5), pages 1411-1428, December.
    7. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, September.
    8. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    9. J. Christophe Bureau & Nancy H. Chau & Rolf Färe & Shawna Grosskopf, 2003. "Economic Performance, Trade Restrictiveness, and Efficiency," Review of Development Economics, Wiley Blackwell, vol. 7(4), pages 527-542, November.
    10. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November.
    11. Diamond, P. A. & McFadden, D. L., 1974. "Some uses of the expenditure function in public finance," Journal of Public Economics, Elsevier, vol. 3(1), pages 3-21, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nikos Tsakiris & Nikolaos Vlassis, 2024. "Border Carbon Adjustments and Leakage in the Presence of Public Pollution Abatement Activities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(9), pages 2231-2258, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    2. Raimondos-Møller, Pascalis & Woodland, Alan D., 2006. "Measuring Tax Efficiency," Working Papers 05-2004, Copenhagen Business School, Department of Economics.
    3. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    4. J. Peter Neary, 2006. "Measuring Competitiveness," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 197-213.
    5. Chen, Bo & Ma, Hong & Xu, Yuan, 2014. "Measuring China’s trade liberalization: A generalized measure of trade restrictiveness index," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 994-1006.
    6. Bouët, Antoine & Berisha-Krasniqi, Valdete & Estrades, Carmen & Laborde, David, 2012. "Trade and investment in Latin America and Asia: Perspectives from further integration," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 193-210.
    7. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    8. John Creedy, 2003. "The Excess Burden of Taxation and Why it (Approximately) Quadruples When the Tax Rate Doubles," Treasury Working Paper Series 03/29, New Zealand Treasury.
    9. Antoine Bouet & Valdete Berisha-Krasniqui & Valdete Berisha-Krasniqui & Carmen Estrades & David Laborde, 2011. "Trade and investment in Latin America and Asia : Potential perspectives from further integration," Larefi Working Papers 1101, Larefi, Université Bordeaux 4.
    10. repec:hal:pseose:hal-00961727 is not listed on IDEAS
    11. repec:hal:gmonwp:hal-00961727 is not listed on IDEAS
    12. Antimiani, Alessandro & Fusacchia, Ilaria & Salvatici, Luca, 2016. "Value Added Trade Restrictiveness Indexes. Measuring Protection with Global Value Chains," Conference papers 332745, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. Ederington,Josh & Ruta,Michele, 2016. "Non-tariff measures and the world trading system," Policy Research Working Paper Series 7661, The World Bank.
    14. Anson Soderbery, 2021. "Trade restrictiveness indexes and welfare: A structural approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(3), pages 1018-1045, November.
    15. Wisarut Suwanprasert, 2020. "The role of the most favored nation principle of the GATT/WTO in the New Trade model," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 760-798, August.
    16. Jeffrey Reimer & Sang Kang, 2010. "Estimation of trade and domestic distortions: an application to world agriculture," Journal of Productivity Analysis, Springer, vol. 34(3), pages 257-265, December.
    17. Ilaria Fusacchia & Alessandro Antimiani & Luca Salvatici, 2021. "An assessment of import tariff costs for Italian exporting firms," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 31-56, April.
    18. Janine Pelikan & Martina Brockmeier, 2008. "Tariff Aggregation and Market Access: An Empirical Assessment for Canada and the EU," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 413-427, December.
    19. Antoine Bouët & Valdete Berisha-Krasniqui & Carmen Estrades & David Laborde, 2011. "Trade and investment in Latin America and Asia :Potential perspectives from further integration," Larefi Working Papers 201101, Larefi, Université Bordeaux 4.
    20. Gaspar, Ví­tor & Afonso, António, 2006. "Excess burden and the cost of inefficiency in public services provision," Working Paper Series 601, European Central Bank.
    21. James E. Anderson & J. Peter Neary, 2004. "Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform," NBER Working Papers 10730, National Bureau of Economic Research, Inc.
    22. Luca Salvatici, 2001. "Trade Distortion Indexes and Applied General Equilibrium Models: The Case of the Common Agricoltural Policy," Working Papers in Public Economics 45, University of Rome La Sapienza, Department of Economics and Law.

    More about this item

    Keywords

    Tax optimality index; Excess burden; Distance function;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4566. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.