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Incidence of a "Social VAT" Reform: A French Scenario

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  • Rebiere, Therese

    ()
    (CNAM, Paris)

Abstract

This paper studies the fiscal incidence of a fiscal reform consisting of a reduction in employers' social insurance contributions financed by a tax based on the value added. In a closed economy with two sectors calibrated thanks to the French National Accounts, a "social VAT" leads to a rise in labor incomes which is usually higher than the rise of capital incomes. In case of perfect intersector mobility of production factors, a reduction in 1 percentage point of the social contributions leads to a rise in net labor incomes which is 0:51 to 0:66 percentage point higher than the rise of the interest rate. For a low intersector mobility the gains of workers, even though unequally distributed, remain higher than that of capitalists. In an open economy when the international capital mobility is sufficiently high, workers are more inclined to suffer from the reform.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7127.

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Length: 17 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7127

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Related research

Keywords: fiscal incidence; social contribution; payroll tax; tax on value added; social VAT;

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  1. McLure, Charles Jr., 1975. "General equilibrium incidence analysis : The Harberger model after ten years," Journal of Public Economics, Elsevier, vol. 4(2), pages 125-161, February.
  2. Peter M. Mieszkowski, 1967. "On the Theory of Tax Incidence," Journal of Political Economy, University of Chicago Press, vol. 75, pages 250.
  3. St├ęphane Gauthier, 2006. "Un exercice de TVA sociale," Working Papers 2006-07, Centre de Recherche en Economie et Statistique.
  4. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
  5. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
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