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The Effects Of Proposed Tax Changes On Poverty And Vulnerable Groups In Serbia

Author

Listed:
  • Gordana Matković
  • Boško Mijatović

Abstract

This paper provides an empirical analysis of the potential effects of a proposed tax reform in Serbia on poverty and vulnerable groups. The essence of the proposal is transferring the tax burden from wages to personal consumption, thus alleviating one production factor and therefore stimulating economic growth. The analysis utilizes the tax-benefit microstimulation model, based on the Household Budget Survey for 2009. Since the model does not include the production sector, the estimated effects are direct, income-based, without the potential economic growth. As expected, the total personal consumption in Serbia would decrease (-3.4%), while poverty would increase (from 6.9 to 7.4%). All of the potentially vulnerable groups would be relatively equally affected. The conclusion is that it is questionable whether it is prudent to implement a tax reform during times of crisis and increased poverty that would probably result in negative short term social outcomes and whose long term effects are still unclear.

Suggested Citation

  • Gordana Matković & Boško Mijatović, 2011. "The Effects Of Proposed Tax Changes On Poverty And Vulnerable Groups In Serbia," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 56(190), pages 27-58, July – Se.
    • Handle: RePEc:beo:journl:v:56:y:2011:i:190:p:27-58
    as

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    References listed on IDEAS

    as
    1. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 147-174, Fall.
    2. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 2, Edward Elgar Publishing.
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    More about this item

    Keywords

    Tax reform; simulation; effects; welfare; consumption; poverty; vulnerable groups;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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