Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257009 
Year of Publication: 
2019
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 7 [Issue:] 3 [Article No.:] 77 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-25
Publisher: 
MDPI, Basel
Abstract: 
This paper attempts to extend the theoretical and empirical methodology employed in previous literature, by proposing a utility maximization process to estimate the optimal tax revenue from a sample of 30 countries. It is shown that an optimal tax system is defined solely by two crucial determining factors: The productive capacity of the country (GDP) and consumers' preferences (consumption spending). All the other variables can be disregarded, as macroeconomic determinants (GDP, consumption) tend to capture the impact of all the remaining factors on tax revenue. It is also shown that our utility maximization method generates tax-effort indices which do not differ significantly from those of IMF and World Bank studies. The actual tax burden for most of the sample countries is shown to be below its optimal level. As expected, the tax-effort performance of each of the sample countries appears to be affected by the variety of approaches employed throughout the text.
Subjects: 
optimal tax revenue
tax capacity
tax effort
utility maximization
JEL: 
H30
H61
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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