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- Title
Optimal Taxation of Informal Firms: Misreporting Costs and a Tax Reform in Brazil.
- Authors
Arbex, Marcelo; Mattos, Enlinson; Regatieri, Rebeca
- Abstract
This paper investigates multistage taxes on firms in a limited tax capacity economy. We characterize the optimal taxation of informal firms reinterpreting behavioral and mechanical effects. Our numerical exercises highlight the relationship between misreporting costs and the elasticities of reported revenues and costs. We explore a tax reform in Brazil with a survey of informal firms to estimate these elasticities (0.55 and 0.94, respectively), which imply smaller sheltering costs for input expenditures. The optimal multistage tax system includes (i) differential linear taxes across the production chain and (ii) a positive, but very small, tax refund rate.
- Subjects
BRAZIL; OPTIMAL taxation; TAX reform; TAX refunds; TAX rates; BUSINESS enterprises; COST; TAXATION
- Publication
B.E. Journal of Macroeconomics, 2024, Vol 24, Issue 1, p1
- ISSN
2194-6116
- Publication type
Article
- DOI
10.1515/bejm-2022-0193