Optimal Commodity Taxation : A Survey and the Brazilian Case (Imposto Otimo Sobre O Consumo: Resenha Da Teoria E Uma Aplicacao Ao Caso Brasileiro)

This paper presents a survey of the optimal commodity taxation theory and, particularly, deals with the issue of uniformity versus selectivity of commodity tax rates. A review of the main empirical models is also presented. Moreover, the study attempts to calculate the optimal commodity taxes for Brazil. For this purpose, a simplified model is specified and solved under the extent of the government's aversion to inequality and restrictive assumptions regarding preferences of households. Our results show that the optimal commodity tax rates should have a selective structure. In particular, commodities in which lower household's expenditure classes spend most should be subsidized