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The Impact of Inflation on Income Tax and Social Insurance Contributions in Europe

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  • Herwig Immervoll

    (University of Cambridge; European Centre for Social Welfare Policy & Research - Vienna)

Abstract

Inflation can alter the characteristics of tax- and contribution systems in numerous ways. This paper demonstrates how inflation alters the distributive properties of nominally defined tax systems and looks at the impact of the tax revenues and social insurance contribution receipts generated. It provides quantitative estimates for Germany, The Netherlands and the UK, using a preliminary version of EUROMOD, a European tax-benefit microsimulation model. The integrated framework provided by the model permits the use of common income concepts across countries and therefore enables one to make informative comparisons of the distributive consequences of the inflation induced erosion of tax- band limits, thresholds, deductions, tax credits, etc. The paper also tests the performance of automatic indexing regimes used in two of the countries.

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File URL: http://128.118.178.162/eps/pe/papers/0302/0302004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0302004.

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Date of creation: 07 Feb 2003
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Handle: RePEc:wpa:wuwppe:0302004

Note: Type of Document - ; figures: included. EUROMOD web-site:
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Web page: http://128.118.178.162

Related research

Keywords: Inflation; Income Tax; Social Insurance Contributions; European Union; Microsimulation;

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References

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  1. Amalio Humberto Petrei, 1975. "Inflation Adjustment Schemes under the Personal Income Tax (Méthodes d'ajustement de l'impôt sur le revenu des personnes physiques pour tenir compte de l'inflation) (Sistemas de ajuste del impue," IMF Staff Papers, Palgrave Macmillan, vol. 22(2), pages 539-564, July.
  2. repec:ese:emodwp:em0-99 is not listed on IDEAS
  3. Aaron, Henry J, 1976. "Inflation and the Income Tax," American Economic Review, American Economic Association, vol. 66(2), pages 193-99, May.
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Cited by:
  1. repec:ese:emodwp:em9-01 is not listed on IDEAS
  2. João Sousa Andrade & António Portugal Duarte, 2011. "The Portuguese Public Finances and the Spanish Horse," GEMF Working Papers 2011-21, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. repec:ese:emodwp:em3-02 is not listed on IDEAS
  4. repec:ese:emodwp:em1-06 is not listed on IDEAS
  5. Immervoll, H., 2000. "Fiscal Drag - An Automatic Stabiliser?," Cambridge Working Papers in Economics 0025, Faculty of Economics, University of Cambridge.
  6. Kai Liu, 2014. "Public Finances, Business Cycles and Structural Fiscal Balances," Cambridge Working Papers in Economics 1411, Faculty of Economics, University of Cambridge.
  7. Callan, Tim & Keeney, Mary J. & Nolan, Brian & Walsh, John R., 2001. "Reforming Tax and Welfare," Research Series, Economic and Social Research Institute (ESRI), number PRS42.
  8. Beier, David, 2009. "Regionale Effekte der Einkommensteuerreform," Forschungs- und Sitzungsberichte der ARL: Aufsätze, in: Öffentliche Finanzströme und räumliche Entwicklung, pages 49-74 Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften.

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