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The Distributional Effects of Value Added Tax in Ireland

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  • Leahy, Eimear
  • Lyons, Seán
  • Tol, Richard S. J.

Abstract

In this paper we examine the distributional effects of Value Added Tax (VAT) in Ireland. Using the 2004/2005 Household Budget Survey, we assess the amount of VAT that households pay as a proportion of weekly disposable income. We measure VAT payments by equivalised income decile, households of different composition and different household sizes. The current system is highly regressive. With the use of a micro-simulation model we also estimate the impact of changing the VAT rate on certain groups of items and the associated change in revenue. We also consider how the imposition of a flat rate across all goods and services would affect households in different categories. The Irish Government has recently announced that it proposes to increase the standard rate of VAT to 22% in 2013 and to 23% in 2014. We examine the distributional implications of such increases. The general pattern of results shows that those hardest hit are households in the first income decile, households in rural areas, 6 person households and households containing a single adult with children.

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP366.

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Date of creation: Dec 2010
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Handle: RePEc:esr:wpaper:wp366

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Keywords: taxes/Ireland/Household budget/children;

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References

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  1. Verde, Stefano & Tol, Richard S. J., 2009. "The Distributional Impact of a Carbon Tax in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(3), pages 317–338.
  2. Callan, Tim & Keane, Claire & Walsh, John R., 2009. "What Role for Property Taxes in Ireland?," Papers WP322, Economic and Social Research Institute (ESRI).
  3. Callan, Tim & Lyons, Sean & Scott, Susan & Tol, Richard S.J. & Verde, Stefano, 2009. "The distributional implications of a carbon tax in Ireland," Energy Policy, Elsevier, vol. 37(2), pages 407-412, February.
  4. Richard S. J. Tol & Tim Callan & Thomas Conefrey & John FitzGerald & Seán Lyons & Laura Malaguzzi Valeri & Susan Scott, 2008. "A Carbon Tax for Ireland," Papers WP246, Economic and Social Research Institute (ESRI).
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Who pays tax in Ireland? The little quiz revisited
    by Ronan Lyons in Ronan Lyons on 2012-04-10 11:52:24
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Cited by:
  1. Duffy, David & FitzGerald, John & Timoney, Kevin & Byrne, David, 2013. "Quarterly Economic Commentary, Winter 2013," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20134, March.
  2. Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers 201230, School Of Economics, University College Dublin.

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