Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with...

This paper investigates optimal tax policy when economic conditions are uncertain, creating risk in tax revenues. Optimal taxation with uncertainty balances costs from volatility and deadweight loss. Tax policy affects volatility through two channels; spreading risk between public and private...

In this paper we examine how model uncertainty due to the preference for robustness (RB) affects optimal taxation and the evolution of debt in the Barro tax-smoothing model (1979). We first study how the government spending shocks are absorbed in the short run by varying taxes or through debt...

In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting...

We explore the welfare consequences of different taxation schemes in an economy where agents are debt-constrained. If agents default on their debt, they are banned from future credit markets, but retain their private endowments which are subject to income taxation. A change in the tax system...