Equity and Efficiency Measures of Tax-Transfer Systems: Some Evidence for New Zealand
AbstractThe redistributive and efficiency aspects of personal taxes are of particular interest to both economists and governments designing tax reforms. Traditionally however, the numerous analytical tools available to calculate distributional and efficiency effects of taxes and transfers are not widely used in tax policy advice. This partly reflects the computational complexities involved in calculating some of those measures and the need for simplicity, and transparency of underlying assumptions, when presenting policy advice. This paper makes two contributions to the analysis of the equity and efficiency effects of tax policy. Firstly, it applies the methodologies proposed by economists to measure equity and efficiency outcomes of taxes to provide some evidence for the New Zealand income tax and transfer system. This makes use of Treasury’s microsimulation model, TaxWell. Secondly, the paper examines a database of low-income New Zealand taxpayers. A decomposition by individual and household characteristics shows that different groups of low income taxpayers can be affected quite differently by various aspects of the tax/transfer system. In particular, tax-free zones do not appear well targeted to help those most in need.
Download InfoIf 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.
Bibliographic InfoPaper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 08/04.
Date of creation: Dec 2008
Date of revision:
Contact details of provider:
Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
More information through EDIRC
Personal Income Taxes; Equity; Redistribution; Transfers; Tax Efficiency;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Creedy, J. & van de Ven, J., 2001.
"Taxation, Reranking and Equivalence Scales,"
Department of Economics - Working Papers Series
782, The University of Melbourne.
- John Creedy, 2004.
"Labour Supply Incentives in Alternative Tax and Transfer Schemes: A Diagrammatic Introduction,"
Australian Economic Review,
The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(2), pages 230-241, 06.
- John Creedy, 2003. "Labour Supply Incentives in Alternative Tax and Transfer Schemes: A Diagrammatic Introduction," Treasury Working Paper Series 03/08, New Zealand Treasury.
- Guyonne Kalb & Rosanna Scutella, 2003.
"New Zealand Labour Supply from 1991-2001: An Analysis Based on a Discrete Choice Structural Utility Model,"
Treasury Working Paper Series
03/23, New Zealand Treasury.
- Rosanna Scutella & Guyonne Kalb, 2004. "New Zealand Labour Supply from 1991-2001: an analysis based on a discrete choice structural utility model," Econometric Society 2004 Australasian Meetings 182, Econometric Society.
- Alex Bakker & John Creedy, 1999. "Macroeconomic variables and income inequality in New Zealand: An exploration using conditional mixture distributions," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(2), pages 59-79.
- Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
- Alan J. Auerbach, 1982.
"The Theory of Excess Burden and Optimal Taxation,"
NBER Working Papers
1025, National Bureau of Economic Research, Inc.
- Dean Hyslop & Dave Maré, 2001. "Understanding Changes in the Distribution of Household Incomes in New Zealand Between 1983-86 and 1995-98," Treasury Working Paper Series 01/21, New Zealand Treasury.
- John Creedy & Cath Sleeman, 2005.
"Adult equivalence scales, inequality and poverty,"
New Zealand Economic Papers,
Taylor & Francis Journals, vol. 39(1), pages 51-81.
- W. Erwin Diewert & Denis A. Lawrence, 1996. "The Deadweight Costs of Taxation in New Zealand," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 658-73, April.
- Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Web and Publishing Team, The Treasury).
If references are entirely missing, you can add them using this form.