We show that the many unusual features of China's financial markets are consistent with a government choosing regulations to maximize a standard type of social welfare function. Under certain conditions, these regulations are equivalent to imposing explicit taxes on business and interest income,...

Tax policies seen in developing countries are puzzling on many dimensions. To begin with, revenue/GDP is surprisingly small compared with that in developed economies. Taxes on labor income play a minor role. Taxes on consumption are important, but effective tax rates vary dramatically by firm,...