Optimal Taxation in Theory and Practice

The optimal design of a tax system has inevitably been deemed as the overriding task for policy makers and economic theorists. In recent years, the significant advancement in economic theory has led to recommendation of more specific policy prescription for taxation. Nevertheless, the policy advices derived from economic theories are partially manifested in the tax policies. This paper, presents a succinct summary of eight key lessons delivered by economists about optimal taxation. It also explores the interplay between tax theories and the adopted taxation policies, per se.