Title: Optimal commodity taxation and consumer welfare: an empirical application to the UAE

Authors: Azzeddine Azzam; Belaid Rettab

Addresses: University of Nebraska-Lincoln, Lincoln, Nebraska, 68503-0922, USA ' Economic Research and Sustainable Business, P.O. Box 1457, Dubai Chamber, Dubai, UAE

Abstract: We compute the optimal commodity tax rates and compare their associated welfare impact with the welfare impact of a uniform tax rate on UAE households with and without exempting food. Household data is used within a linear expenditure system that considers joint allocation of leisure and seven broad commodity groups. We find that households are worse off with a uniform tax when food is not taxed.

Keywords: optimal taxation; United Arab Emirates; UAE; consumer welfare; linear expenditure system; LES; commodity taxes; uniform tax rates; food exemption; optimisation; leisure.

DOI: 10.1504/IJEPEE.2015.072311

International Journal of Economic Policy in Emerging Economies, 2015 Vol.8 No.3, pp.191 - 212

Received: 05 Feb 2014
Accepted: 12 May 2014

Published online: 09 Oct 2015 *

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