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Impact of Harmonisation on Distribution of VAT in the Czech Republic

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  • Barbora Slintáková
  • Stanislav Klazar

Abstract

The aim of this paper is to analyse progressivity of value added tax in the Czech Republic under the framework of both annual incidence and lifetime incidence. Moreover, impact of the harmonisation of VAT rates connected with the accession of the Czech Republic to the EU on the income distribution is examined. The burden table serves to show the distribution of the VAT burden among households by income categories; the generalised entropy measures and the Gini coefficient are used for measurement of inequality of income. Results show that the Czech VAT is regressive when annual income is analysed while the lifetime income analysis indicated that VAT is progressive. Furthermore, the results suggest that the distribution of income (annual as well as lifetime) after taxation was more equal before the harmonisation, and that impact of the changes in VAT rates in 2004 was likely larger on the lower-income households.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2010 (2010)
Issue (Month): 2 ()
Pages: 133-149

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Handle: RePEc:prg:jnlpep:v:2010:y:2010:i:2:id:368:p:133-149

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Related research

Keywords: value added tax; tax incidence; tax harmonisation; redistributive effect; progressivity; inequality measures;

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References

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  1. Gilbert E. Metcalf, 1994. "Lifecycle vs. Annual Perspectives on the Incidence of A Value Added Tax," NBER Working Papers 4619, National Bureau of Economic Research, Inc.
  2. Gilbert E. Metcalf, 1994. "Life Cycle versus Annual Perspectives on the Incidence of a Value Added Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 45-64 National Bureau of Economic Research, Inc.
  3. Alexandre Mathis, 2004. "VAT indicators," Taxation Papers 2, Directorate General Taxation and Customs Union, European Commission, revised Apr 2004.
  4. Stéphane Mussard & Michel Terraza & Françoise Seyte, 2003. "Decomposition of Gini and the generalized entropy inequality measures," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-6.
  5. Zandvakili, Sourushe & Mills, Jeffrey A., 2001. "The distributional implications of tax and transfer programs in US," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(2), pages 167-181.
  6. repec:ebl:ecbull:v:4:y:2003:i:7:p:1-6 is not listed on IDEAS
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Cited by:
  1. Arsić, Milojko & Altiparmakov, Nikola, 2013. "Equity aspects of VAT in emerging European countries: A case study of Serbia," Economic Systems, Elsevier, vol. 37(2), pages 171-186.
  2. Petr Jansky, 2013. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," IFS Working Papers W13/20, Institute for Fiscal Studies.

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