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ERIC Number: EJ881415
Record Type: Journal
Publication Date: 2010
Pages: 25
Abstractor: As Provided
Reference Count: 40
ISSN: ISSN-0276-8739
How Regressive Are Indirect Taxes? A Microsimulation Analysis for Five European Countries
Decoster, Andre; Loughrey, Jason; O'Donoghue, Cathal; Verwerft, Dirk
Journal of Policy Analysis and Management, v29 n2 p326-350 Spr 2010
Shifting the tax burden from labor to consumption is proposed in many developed countries as a way to make the tax system more incentive compatible. This article deals with the simulation of such a policy change to sharpen the distributional picture. Expenditures are imputed into the EUROMOD microsimulation program. Then social security contributions are lowered and the standard VAT rate is increased to maintain government revenue neutrality. The main conclusions are that (1) indirect taxes are regressive with respect to disposable income but proportional or progressive with respect to total expenditures, and (2) indirect taxes are in any case less progressive than other components of the tax system, making the proposed measure a regressive one. A possible solution exists in increasing the progressivity of the remaining income tax. (Contains 16 tables and 16 footnotes.)
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Publication Type: Journal Articles; Reports - Evaluative
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Identifiers - Location: Belgium; Greece; Hungary; Ireland; United Kingdom