Advanced Search
MyIDEAS: Login to save this article or follow this journal

Indirect Taxation and Progressivity: Revenue and Welfare Changes

Contents:

Author Info

  • John Creedy
  • Catherine Sleeman

Abstract

When debating an existing or proposed indirect tax, particular emphasis is often given to the disproportional effect of the tax. This effect is intended to show how the welfare loss from the tax is distributed across households with various income levels. Typically, the disproportional effect is assessed using a tax-revenue-based measure that computes how the amount of tax paid, expressed as a fraction of household expenditure, varies as household expenditure increases. However, the amount of tax paid by a household does not always form a good measure of the welfare loss experienced by the household. Hence a more appropriate assessment of the disproportional effect of a tax is a welfare-based measure that computes the variation in the welfare loss (from the tax) as a fraction of household expenditure, as household expenditure increases. This paper shows that when the households' preferences, in respect to their choice of goods, are allowed to vary among households, tax revenues provide a poor measure of disproportionality, producing results that directly conflict with those produced from a welfarebased measure. The New Zealand indirect tax system is used to show that such cases of conflict are frequent, reinforcing the importance of using a welfare-based measure when assessing the disproportional effects of an indirect tax.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ingentaconnect.com/content/mohr/fa/2006/00000062/00000001/art00003
Download Restriction: Fulltext access is included for subscribers to the printed version.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 62 (2006)
Issue (Month): 1 (March)
Pages: 50-67

as in new window
Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200603)62:1_50:itapra_2.0.tx_2-4

Contact details of provider:
Web page: http://www.mohr.de/fa

Order Information:
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Email:

Related research

Keywords: tax progressivity; equivalent variations; budget shares;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(200603)62:1_50:itapra_2.0.tx_2-4. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.