Dynamics Model of Firms' Income Tax

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62690094%3A18450%2F16%3A50004917" target="_blank" >RIV/62690094:18450/16:50004917 - isvavai.cz</a>
Result on the web
<a href="http://mme2016.tul.cz/conferenceproceedings/mme2016_conference_proceedings.pdf" target="_blank" >http://mme2016.tul.cz/conferenceproceedings/mme2016_conference_proceedings.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Dynamics Model of Firms' Income Tax
Original language description
The aim of this paper is to introduce a simple dynamic model that describes the tax revenue of a given government. The paper deals with a modification of Ramsey model that uses the neoclassical dynamical model and determines the optimal consumption as a result of optimal intertemporal choices of individual households. For simplicity the model considers only a tax on income of firms. This leads to a different selecting of optimal prices of labor and capital services. Euler equation of optimal consumption path of household is then introduced as well as its particular interpretation. We also study long-term effects of taxation of the given model. Hence the steady state of the dynamical model is introduced and then a formula for steady state Laffer curve is derived. Having this formula we further study the properties of optimization of tax revenue. First, it is shown that the optimal tax rate is dependent on the magnitude of elasticity of capital which is an exogenous parameter of the neoclassical production function. Then methods of comparative statics are used to find a sensitivity of tax revenue at steady state of the economic unit on some parameters.
Czech name
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Czech description
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Publication year
2016
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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