Optimal Commodity Taxes in Australia and their Sensitivity to Consumer Preference and Demographic Specification.

This study provides evidence on optimal commodity tax rates in Australia, and on their sensitivity to demand function and demographic specification. The optimal tax algorithm, proposed and used here, allows the social welfare weights to depend on prices, household composition and aggregate household expenditure. The optimal commodity tax rates are compared with the actual tax rates not only with regard to their magnitude but, also, in terms of their redistributive impact.