Journal of Tax Research

Abstract

Tax is one of the financial policy tools in regulating various economic activities to achieve economic balance and to establish social justice. Tax policies can not only help to provide financial resources for government, but also contribute to economic development and growth. Government can use appropriate tax policies and optimized combination of direct and indirect taxes to accomplish successfully optimized resource assignment, redistribution of income and social justice. In other words in tax literature, the optimized taxation theory has been developed with the aim at considering justice and equality. The optimized tax rates are a series of rates which values should be selected in a way to maximize utility function and to produce maximum revenue and has minimum negative consequences. The tax revenues affect the efficiency of financial policies implementation. One of the factors affecting government performance in receiving tax revenues is rent-seeking opportunities through which the possibility of tax unpaid may occur. This paper tries to extract the optimized tax rates in the context of rent-seeking economy in terms of a public balance system and intelligent optimization methods (Genetic Algorithm). The results of optimization of described models indicated that in the context of rent-seeking in government tax revenues, tax on consumption is more than optimized level and conversely, tax on wage and payment is lower than the optimized level. These findings indicate that the possibility of rent-seeking on wage tax is more than consumption tax due to implementation complexity and its reception. Meanwhile, rent-seeking in consumption tax is lower than another due to transparency and a single rate.