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Cascading, revenue neutrality and the VAT: Some theoretical results

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Author Info
Mukhopadhyay, Hiranya (National Institute of Public Finance and Policy)
Abstract

The conventional conclusion is that, ceteris paribus, a revenue-neutral VAT would have no impact on the aggregate price level, unless it elicits a supply response due to a lower degree of distortions. This paper shows that even if we ignore supply response, a revenue-neutral VAT can lead to higher output and lower price in a demand-constrained output regime. However, price will remain unchanged in a supply-constrained output regime.

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Publisher Info
Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 199703.

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Length: 15
Date of creation: Apr 1997
Date of revision:
Handle: RePEc:npf:wpaper:199703

Note: Working Paper 4, 1997
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Web page: http://www.nipfp.org.in/working_paper/

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Related research
Keywords: Value added tax

Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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