In this paper we consider the role of governments in designing their policy for tax planning strategies. We consider two distinct types of social costs: the cost associated with lost tax revenue, and the cost that arises from taxpayers' search for new methods to reduce their tax burden....

Taxation is one of the few things that we can take as a given in life. People will always look for ways to minimize the tax burdens that governments seek to impose on them. Indeed, there is a very well-developed industry devoted to that end. How should governments proceed? We develop an economic...

Although most individuals recognize the necessity of taxation, few like to pay taxes. Governments face costs to collect taxes; people expend resources to legally avoid taxation. Such expenditure represents social waste, as it is a form of rent-seeking. Since there is a market for tax planning...