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Marginal Indirect Tax Reform in Australia

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  • John Greedy

    (The University of Melbourne, VIC)

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    Abstract

    This paper examines indirect tax reform in Australia using the method developed by Ahmad and Stern (1984). It is usual, in calculating the changes in demand that would result from marginal tax reform, to use aggregate own-price and cross-price demand elasticities. However, the present paper uses an approach in which the demand elasticities are allowed to vary with the value of total expenditure of the household. The pattern of optimal directions of marginal tax changes is found to be influenced by the existence of inequality aversion, though the effect of increasing aversion depends on the commodity group. Both equity and efficiency considerations (arising from the distortion to consumer choice) play a role in determining the preferred direction of marginal reforms.

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    File URL: http://www.eap-journal.com/archive/V29_I1_1.pdf
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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 29 (1999)
    Issue (Month): 1 (March)
    Pages: 1-14

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    Handle: RePEc:eap:articl:v:29:y:1999:i:1:p:1-14

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    Keywords: Tax;

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    Cited by:
    1. John Creedy, 2009. "The Personal Income Tax Structure: Theory and Policy," Department of Economics - Working Papers Series 1063, The University of Melbourne.
    2. John Creedy & Nicolas Hérault, 2009. "Optimal Marginal Income Tax Reforms: A Microsimulation Analysis," Melbourne Institute Working Paper Series wp2009n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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