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Distortionary Taxation and the Debt Laffer Curve

This paper highlights the importance of the role of the domestic tax system in determining the economic consequences of an external debt overhang. A simple taxation scheme is specified and it is shown that a country can be on the “wrong side” of its debt Laffer curve only if it is on the wrong side...

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Bibliographic Details
Main Author: Husain, Aasim
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1992
Series:IMF Working Papers
Subjects:
Finance
Debt Reduction
Public Finance & Taxation
Debt Management
Long-term Capital Movements
Debt
Exports And Imports
International Economics
International Lending And Debt Problems
Debts, External
Sovereign Debt
Debt Burden
Taxation, Subsidies, And Revenue: General
Tax Administration And Procedure
Capital Outflows
Capital Movements
Tax Distortions
Financial Risk Management
Taxation
International Investment
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper highlights the importance of the role of the domestic tax system in determining the economic consequences of an external debt overhang. A simple taxation scheme is specified and it is shown that a country can be on the “wrong side” of its debt Laffer curve only if it is on the wrong side of its tax Laffer curve. The analysis indicates that fairly strong, and probably unrealistic, assumptions about the domestic tax system are needed to argue that the investment disincentives associated with the debt overhang are large enough to place a country on the wrong side of its debt Laffer curve
Physical Description:24 pages
ISBN:9781451926545

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