Uncertain income, uncertain taxes and Ricardian equivalence

Article Abstract:

Studies have shown that current consumption is stimulated when a tax cut's riskiness lowers as it is financed by bonds to be repaid from proportional income taxes on uncertain future income, negating the Ricardian equivalence. However, these studies' two-period models failed to consider that future taxes may be uncertain. A three-period model is drawn up, introducing ex ante tax rate uncertainty by granting the government two periods in which to collect taxes. Meanwhile, taxes levied as lump sums and via a 'lottery' produce zero and negative effects, respectively, on consumption.

Analysis, Tax research, Uncertainty

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Seigniorage and tax smoothing in developing countries

Article Abstract:

The extended tax-smoothing model is assessed using data from 32 developing countries. Results reject the testable implications of the tax smoothing theory in all cases. A testing of the assumption that money velocity is a constant yielded substantial evidence that the assumption is inappropriate. While seigniorage is clearly an important source of revenue in developing countries, evidence suggests that the principles of optimal taxation have not been applied when developing countries increase revenues from inflation.

Usage, Developing countries, Smoothing (Numerical analysis)

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Ecological tax reforms and the environment: a note

Article Abstract:

Ecological tax reforms do not necessarily lead to an improvement in environmental quality. Using first-best and second-best world models, an increase in taxes on polluting goods may result in negative environmental consequences. Revenue-neutral ecological tax reforms in a second-best framework may actually deteriorate the environment. It can be deduced that improving the environment necessitates both ecological tax reforms and the accompanying initiatives taken by the government to ensure revenue neutrality.

Environmental Management, Tax reform, Pollution, Control, Environmental protection

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