Georges Casamatta
ECOPA Working Paper 14, October 2011

In this paper, we study the optimal mix of direct and indirect taxes in the presence of tax avoidance. It is shown that a linear consumption tax is part of the optimal tax scheme, and so even when the assumptions of the Atkinson-Stiglitz theorem are not satis ed. The reason is that taxing consumption is a way to tax true income, whereas income taxation only falls on reported income. We also show that, with a weakly separable utility function and linear Engel curves, tax rates should be uniform across goods. With nonlinear Engel curves, which good should be taxed more depends on the comparison of a redistributive and an efficiency effects.

Georges Casamatta
ECOPA Working Paper 13, July 2011

In this paper, we follow the approach of Grochulski (2007), who determines the optimal income tax schedule when individuals have the possibility of avoiding paying taxes. We however modify his setup by considering a convex concealment cost function. This assumption violates the subadditivity property used in Grochulski (2007) and this has strong implications for the design of the tax schedule. This latter indeed shows that, with subadditivity, all individuals should declare their true income. Tax avoidance is thus not optimal. With a convex cost function, we nd that a subset of individuals, located in the interior of the income distribution, should be allowed to avoid taxes, provided that the marginal cost of avoiding the rst euro is su ciently small. We also provide a characterization of the optimal income tax curve.

Antoine Belgodere, Frédéric Puech, Charles Vellutini
ECOPA Working Paper 12, December 2009

OPTAX is a modeling framework for applied taxation analysis. It is based on the computable general equilibrium (CGE) approach, widely used by professional and academic economists to study tax reforms and trade policies. To this model we have appended two key measures of tax efficiency and equity: Marginal Cost of Funds and Marginal Effective Tax Rates. In addition, OPTAX uses to its full potential the power of recent numerical solvers to determine in one run the optimal tax structure, while capturing the distributional aspects and costs of reforms. This paper presents both OPTAX’s underlying principles and an application to tax policy analysis in Mali.

Antoine Belgodere and Charles Vellutini

ECOPA Working Paper 11, Juin 2009

This paper argues that Monte-Carlo experiments can help improve sensitivity analysis in CGE modeling. Monte-Carlo experiments provide the modeler with a population of exogenous parameters and endogenous variables. Standard econometrics can shed light on the relationship between them, and help to identify key parameters. As an illustration of the proposed methodology, we study the impact of the EU-Central Africa Economic Partnership Agreement on fiscal revenue in Cameroon. The Monte-Carlo experiments suggest that this impact is critically influenced by the model’s elasticities in the oil sector.

Kofi Nouve, Cristina Rampulla and Charles Vellutini   
ECOPA Working Paper 10, March 2008

The Economic Partnership Agreement (EPA) between the Economic Community of West African States (ECOWAS) and the EU will lead to the elimination of tariffs on ECOWAS imports originating in the EU. Through its impacts on production, consumption, private and public incomes, the EPA has the potential to change poverty dynamics in Mali. This study measures the impact of the EPA on Mali's welfare and poverty indicators using a dynamic Computable General Equilibrium model representative of the Malian economy. Several scenarios are simulated and important lessons emerge from the analysis. First, a full liberalization of imports between EU and ECOWAS in 2008 would have resulted in a 7-8% rise in household welfare, as compared to the baseline welfare in the absence of the EPA, and would have reduced poverty incidence by 1.2 percentage points. Secondly, using a more realistic scenario, when imports are liberalised over twelve years, welfare gains would amount to 3-4% and gains in poverty reduction would be 0.4%. Thirdly, the largest gains would come from an EPA scenario which extends the common market of the West African Economic and Monetary Union to EU and ECOWAS. Finally, despite its expected gains, it is useful to stress that EPA’s contribution to poverty reduction in Mali remains negligible compared to the millennium development goal to halve poverty incidence by 2015.