Relativity, inequality and optimal taxation of internationally mobile top incomes

This study examines the structure of optimal commodity tax rates in a many-person many-goods static computational model using segmented LES utility. One of the major findings is that with non-linear Engel curves and linear income tax, optimal commodity tax rates will be progressive and highly dispersed under logarithmic utility specifications. The dispersion of tax rates is reduced if the inequality aversion rate of society is low. With exogenously given non-optimal and non-linear income tax schedules, usually there is still a need for differentiated and progressive indirect taxation. These findings are in marked contrast to the continuing preoccupation of much of the literature with uniform indirect taxation for redistributive purposes. The results also indicate that if tax evasion incurs substantial deadweight costs, it usually reduces optimal tax rates by over a half of the evasion/revenue ratio of the product, with the reduction being larger for necessities and smaller for luxuries. Private compliance costs and government administration costs reduce optimal tax rates by a similar amount to the share of these costs from taxes. In a model with linear income tax, the effect of externalities on optimal tax rates substantially exceeds the corresponding Pigouvian tax rates or subsidies. The main benefit of higher taxes on leisure complements than leisure substitutes appears to be in boosting tax revenue for redistribution, rather than in improving the utility position of those paying the taxes. The effect of complexities such as tax evasion, administrative costs, externalities and leisure complements/substitutes on redistribution is not neutral. Generally, these factors tend to increase the progressivity of optimal commodity tax rates.

Up to now, numerous tax bases with different rates have been identified in Iran's economy. The questions are “Are these rates optimal?” and “Is it possible to determine an average optimal rate in a way that it would bring greater growth and prosperity?”. In the present study, we seek to determine Iran's optimal tax rates using time series data in the years 1978-2014, a dynamic optimal control approach, and the maximum principle. According to the findings, the main factors affecting the optimal tax rate include the ratio of expenditures of the private sector to the public sector, the ratio of investment in the public sector to the private sector, depreciation rate, rate of time preference, elasticity of production function to the investment in the private sector and the public sector, and technical progress. Among the above factors, the ratio of expenditures of the private sector to the public sector has a negative effect, and the ratio of investment in the public sector to the private sector has a positive effect on the optimal tax rate. The other variables have no significant effect on the optimal tax rate. In addition, the optimal tax rate is 20 percent. Since there are several tax bases in Iran, average tax rates should be close to the optimal rate. Changes in tax rates should be according to the economic conditions of boom and bust. In this regard, finding new tax bases to reduce the negative effects of changes in tax rates is very important.

This paper presents a new approach to the two-sector optimal taxation problem. We derive the optimal labor income tax rate which depends on factor intensity across sectors. It is the labor intensity that determines the initial wage rate, and therefore the optimal labor tax rate. We show that an increase in the initial relative price of consumption goods decreases the optimal tax rate on labor income in the case that the consumption goods sector is capital-intensive while it increases the optimal tax rate on labor income in the case that the investment goods sector is capital-intensive.

We model an economy where present biased preferences affect the bequest leaving decisions. Using Bequest in the Utility (BIU) setup, we show that the optimal inheritance tax rate under present bias can be derived in terms of estimable sufficient statistics. This optimal tax rate decreases with the level of temptation and a subsidy can be optimal at some level of bequests received. We then use the Barro-Becker Dynastic (BBD) setup to derive the expression for the optimal inheritance tax rates. We observe that if the agents internalize the taxes on the amount of bequest that they leave (sensitive generations), present bias and optimal tax rates are negatively related as in BIU, that is, providing an incentive by extending subsidies or lowering taxes is recommended to subside the effects of temptation. However, if agents ignore the taxes to be paid by their descendants on the inheritance left (ignorant generations), optimal tax rates increase with the level of present bias. This is because the present bias reduces the tax base and the rationale of providing incentives does not work anymore. Our calibration exercise supports all these theoretical findings.

Presents the actual problems of definition optimal tax rate of company, for which solving is developed imitation mathematical model. On the bases of analyzing economical activities of company is worked out the structural scheme of definition optimal rate of tax payment. The computer model of the system taxation company of the optimal rate for profit is developed by form of block-scheme. With the using of that carried out computer experiment by corresponding program in MatLab. Investigation of results are presented by graphics form that confirms adequate of Laffer's curves. As shows performed research the higher of profitability company, the clearer expressed optimal tax rate. Increasing of profitability reduces optimal rate with 21% and accordingly state can reduce tax rate.

We investigate how the optimal production tax rate is affected by privatization policies in a mixed oligopoly in which a state‐owned public firm competes against private firms in a free‐entry market. First, we investigate the domestic private firm case. The optimal tax rate is strictly positive except for the full privatization and full nationalization cases, and the relationship between the optimal tax rate and degree of privatization is an inverted U‐shape. Next, we investigate the foreign private firm case and find that the non‐monotonic relationship disappears.

This paper calibrates the full social optimal inheritance tax rate derived by Piketty and Saez (2013) and shows that different assumptions on the form of the social welfare function lead to very different optimal inheritance tax rates, ranging from negative (under a utilitarian criterion) to positive and large (even assuming joy of giving motives). The paper also calibrates the optimal tax rate by percentile of the distribution of bequest received, as Piketty and Saez do, but accounting for heterogeneity in wealth and labor income. The result is that the optimal tax rate from the perspective of the non-receivers varies significantly, contrary to the constant tax rate obtained by these authors.

The optimal taxation of foreign and domestic investors' incomes is examined with a simple overlapping-generations model. Even when tax rates are allowed to discriminate between these groups,the optimal tax rates on both domestic and foreign investors' incomes in the small open economy are identical and equal to the optimal rate of tax in the closed economy. In light of the emphasis in the literature on the extent to which the elasticity of international flows might lower optimal capital income taxes, this conclusion is quite a surprise. In the large open economy, the optimal tax rate on foreign investors'income alone is a weighted average of one and the small economy tax rate. The optimal tax rate on domestic income is, again, unaffected by the openness ofthe economy. When a uniform tax rate must be set in the large open economy, it is generally higher than the optimal tax rate for a closed economy, a conclusion contrary to the conventional wisdom. However, a higher elasticity of international capital flows is associated with a lower tax rate, as expected, butthe rate remains above the closed-economy rate. In summary, openness matters for optimal tax policy, primarily in the case of the large economy. The reason is mainly the ability to burden foreign investors with a tax liability.

If optimal tax theory is to be the basis for calculating tax rates, a close understanding is required of the relationship between the structure of preferences and the configuration of optimal tax rates. Otherwise hypotheses chosen by the econometrician for practical convenience may completely determine the results, independently of measurement. This paper explores the relationship between various types of separability, particularly weak and implicit separability, and optimal tax rates in the various models discussed in the literature. The use of distance functions and the Antonelli matrix provides a significant unification of previously disparate results. IN THE FINAL ANALYSIS, optimal tax theory should be the basis for actual calculation of tax rates. Although recently there have been great advances in theoretical results and in our understanding of their meaning, we are still some way from a working knowledge of whether uniform commodity taxes are in practice optimal or, if not, which commodities should be discriminated against. Present theoretical formulae do not yield clear-cut results except in special cases and it has recently become clear that optimal rates depend crucially on the detailed structure of consumer preferences. For example, Atkinson and Stiglitz [3] show that with an optimal nonlinear income tax, discriminatory commodity taxes are only necessary to the extent that individual commodities are not weakly separable from leisure. More recently, Deaton [6] has shown that a similar result holds for what is perhaps the most interesting of the standard models, that where there are many consumers and only a linear income tax and proportional commodity taxes are allowed. In this case, separability between goods and leisure, together with linear Engel curves for goods, removes the need for differential commodity taxation. In consequence, nothing can be learned about commodity taxes from consumer demand studies in which commodity demands are explained conditionally on total expenditure and commodity prices and which assume linear Engel curves. All such studies require separability from leisure as a maintained hypothesis and so are consistent with uniform commodity taxation. These results suggest that the prospects for meaningful empirical calculations of tax rates are bleak. Econometricians estimating commodity demand and labor supply equations make generous use of separability assumptions to enable estimation at all. In consequence, it is likely that empirically calculated tax rates, based on econometric estimates of parameters, will be determined in structure, not by the measurements actually made, but by arbitrary, untested (and even unconscious) hypotheses chosen by the econometrician for practical convenience. To remedy this situation, and as a prelude to fruitful empirical work, it is necessary to have a more explicit understanding of how preference structure affects optimal tax rates. Such is the object of this paper. Three different

As an important natural resource, mineral resources are indispensable necessities for human’s social existence and economic development. As China’s industrialization process continues to gradually increase, conflicts about resource constraint and ecological pressure resulting from economic and social development are increasingly evident. Key problems of how to guarantee the security of national mineral resources supply, ease the contradiction of resource constraint, and reduce ecological pressure are significant current challenges in China. The Chinese government has successively implemented new types of resource taxes including valorem and free fee and regulate reform for oil, natural gas, and coal resources in an attempt to adjust differential income needs and protect resources. Given these efforts, there have also been strategies to reform policies for the use and taxation of non-ferrous metal resources. In 2016, the Chinese Ministry of Finance and the State Council jointly issued a government document to comprehensively promote the reform of resource tax policy. This document also set the standards of tax rate for seven metal minerals. Copper is one of the regulated minerals, and the tax rate range of copper mine was set as 2% to 8%, dependent on the conditions of different provinces. We constructed a resource computable general equilibrium (CGE) model to investigate the optimal tax rate of copper resource under ad valorem duty in China. The results showed that the best tax rate is 4%. Based on this optimal rate, a dynamic CGE model was built to analyze and dynamically forecast the macroeconomic impact of different tax rates, providing insight into the best strategy to enable cost control for enterprises and efficient and effective policymaking by the government. Because comprehensive resource tax reform remains in the exploratory stage, the results of this study will provide a reference for the future optimization of the copper mine resource tax rate.

The article presents a macroeconomic equilibrium model in which aggregate demand and aggregate supply are considered not in relation to the price level, as is traditionally done, but in terms of functions dependent on the average tax rate. The concepts of optimal and equilibrium tax rates are introduced. In the former case, aggregate supply is maximum, while in the latter case aggregate demand and supply coincide. Based on an analysis of the model, it is shown that when the government tries to maintain the equilibrium average tax rate at a fixed level, the optimal tax rate becomes dependent on the price level, and an appropriate change in aggregate demand may lead to approximation of the optimal rate to the equilibrium rate. It is also demonstrated that each given value of the equilibrium tax rate can be matched with a set of functions and curves of aggregate supply and the national budget's tax revenues.

In contemporary economic theories, the role of taxes is studied one-sidedly. Keynesianism mostly emphasizes the mechanisms by which taxes affect the economy through aggregate demand and almost does not take into account the mechanism of their effect on the aggregate supply-side. The problem of taxes is also seen one-sidedly by supply-side economics, in which the effect of the tax rate on aggregate supply is brought to the fore. The paper presents a macroeconomic equilibrium model in which aggregate demand and aggregate supply are considered not in relation to the price level, as is traditionally done, but in terms of functions dependent on the average tax rate. The concepts of optimal and equilibrium tax rates are introduced. Based on an analysis of the model, it is shown that when the government tries to maintain the equilibrium average tax rate at a fixed level, the optimal tax rate becomes dependent on the price level, and an appropriate change in aggregate demand may lead to approximation of the optimal rate to the equilibrium rate. It is also demonstrated that each given value of the equilibrium tax rate can be matched with a set of functions and curves of aggregate supply and the national budget's tax revenues. © 2013 Bull. Georg. Natl. Acad. Sci.

Within the scope of optimal tax theory, the optimality problem of fiscal policies in the Turkish tax system for the period 1980-2019 will be discussed from the perspective of the Laffer curve. The study, it is aimed to obtain the real Laffer curve showing the relationship between total tax revenues and tax rate for Turkey. Macroeconomic variables such as tax rates, tax revenues, crisis periods, unemployment rates, and real wages are included in the analysis with the help of an econometric package program. Within the scope of time series, the effect of the tax rate on tax revenues was investigated using Johansen and ARDL cointegration approaches. According to the findings obtained from the analyses, the total tax rates in Turkey are on the right of the Laffer curve, in other words, the Laffer curve exceeds the optimal point. Based on the hypothetical existence of Laffer theorem’s in Turkey, the optimal tax rates were calculated for the total tax revenues, and the current tax rates of each year were compared with the optimal tax rates. It has been determined that the total tax rates in the specified period are in the forbidden region of the Laffer curve. This situation, which states that the tax burden has increased, reveals that the taxation process should be revised. There is no comprehensive empirical analysis of Turkey. The findings will guide the applications that will contribute to the field. The originality of the work; is based on the inclusion of time series analysis of macroeconomic data such as crisis periods, unemployment rates, real wages as independent variables in determining the relationship between tax revenues and tax rates. The validity of the Laffer curve for each tax (Income Tax, Corporation Tax, VAT) in the Turkish tax system can be examined with the data and methods used in the research.

The paper analyses the optimal tax policy in an endogenous growth model in a command economy, where the commodity output is produced with only physical capital, and skilled labour is the only input in producing the service good. In the benchmark model, per capita government expenditure is used to create human capital. Two cases are considered regarding taxation: in the first, tax is imposed on both commodity and service sectors, while in the second only the service sector is taxed. In each case the model derives the optimal tax rate and steady-state growth paths. In the first regime where both sectors are taxed we find the optimal tax rate on the service sector to be zero, but on commodity output it is positive. However, in the second regime there is also a unique optimal tax rate on the service sector to finance human capital accumulation. Comparing the growth rates in both cases we also observe that the imposition of tax on only the service sector instead of on both sectors yields a higher rate of growth if the population growth rate along with the marginal productivity of human capital is sufficiently high. We also show that when the service sector is taxed it may grow at a higher rate than the manufacturing sector. An extension of the benchmark model in which government spends tax revenue on accumulation of human capital as well as physical capital confirms that the optimal service tax rate is zero, but the optimal commodity tax rate is positive when both sectors are taxed.

This paper extends the calibrations of Piketty and Saez (2013. “A Theory of Optimal Inheritance Taxation.” Econometrica 81 (5): 1851–86) to unveil the importance of the assumed social welfare criteria and its interplay with individual heterogeneity on optimal inheritance taxation. I calibrate the full social optimal tax rate and find that it is highly sensitive to the assumed social welfare criteria. The optimal tax rate ranges from negative (under a utilitarian criterion) to positive and large (even assuming joy of giving motives). A decreasing marginal utility of consumption does not affect the results qualitatively, given the underlying distribution of wealth and income. I also calibrate the optimal tax rate by percentile of the distribution of bequest received, as in Piketty and Saez, but accounting for heterogeneity in wealth and labor income. This leads to significant variation in the optimal tax rate among zero-bequest receivers, contrary to their finding of a constant tax rate.