Český finanční a účetní časopis 2009(3):24-36 | DOI: 10.18267/j.cfuc.34

Optimal Taxation - Review of Theory

Květa Kubátová
Prof. Ing. Květa Kubátová, CSc. - profesorka; Katedra veřejných financí, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3, Česká republika; CESTA, Vysoká škola finanční a správní, Estonská 500, 110 00 Praha 10; <kubatova@vse.cz>.

The overview article provides information on the status of the theory of optimal taxation. The aim was to provide an overview of the latest research in particular in the field of optimal taxation, to allow the survey to provide inspiration to the creation and application of models for the purpose of tax reform in the Czech Republic. Finding the optimal tax is balancing between tax efficiency and tax equity. The starting point for the current theory are the classical models of Ramsey (1927), Mirrlees (1971), Diamond and Mirrlees (1971), possibly a newer contribution of Atkinson and Stiglitz (1987). Current models of optimal taxation extend knowledge about the inclusion of variables such as administrative costs, tax evasion, externalities, intergenerational distribution, public debt, market imperfections. Some are also more disaggregated on different income groups of households or households with different earning capacity, different markets, etc. However, the one aspect of the matter is the tax theory and the second is the practical implementation of tax reforms. The reform is based on certain state tax system, and establish an entirely new state is politically unrealistic. Another problem is lack of information on key parameters (such as elasticity of demand, elasticity of substitution between goods, etc.).

Keywords: Optimal taxes; Tax theory; Optimal income tax; Optimal consumption tax.
JEL classification: H21

Published: October 1, 2009  Show citation

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Kubátová, K. (2009). Optimal Taxation - Review of Theory. Czech Financial and Accounting Journal, 2009(3), 24-36. doi: 10.18267/j.cfuc.34
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