Optimum commodity taxation with a non-renewable resource

In: Daubanes , J X & Lasserre , P 2017 ' Optimum commodity taxation with a non-renewable resource ' .

Abstract

We examine optimum commodity taxation (OCT), including the taxation of non-renewable resources (NRRs), by a government that needs to rely on commodity taxes to raise revenues. NRRs should be taxed at higher rates than otherwise-identical conventional commodities, according to an augmented, dynamic version of the standard Ramsey rule. This rule is compatible with the variety of observed NRR tax systems. OCT of NRRs distorts developed reserves, which are reduced, and their depletion, which is slowed down. We contradict Chamley-Judd conclusion that capital should not be taxed in the long run. Our formulas can directly be used to indicate how Pigovian taxation of carbon NRRs should be increased in the presence of public-revenue needs, as illustrated in a numerical example. We show that NRR substitutes and complements should receive a particular tax treatment. Finally, in a NRR-importing economy, Ramsey NRR taxes are further increased to allow the capture of foreign rents. ; We examine optimum commodity taxation (OCT), including the taxation of non-renewable resources (NRRs), by a government that needs to rely on commodity taxes to raise revenues. NRRs should be taxed at higher rates than otherwise-identical conventional commodities, according to an augmented, dynamic version of the standard Ramsey rule. This rule is compatible with the variety of observed NRR tax systems. OCT of NRRs distorts developed reserves, which are reduced, and their depletion, which is slowed down. We contradict Chamley-Judd conclusion that capital should not be taxed in the long run. Our formulas can directly be used to indicate how Pigovian taxation of carbon NRRs should be increased in the presence of public-revenue needs, as illustrated in a numerical example. We show that NRR substitutes and complements should receive a particular tax treatment. Finally, in a NRR-importing economy, Ramsey NRR taxes are further increased to allow the capture of foreign rents.