Economic Effects of VAT Reform in Germany
AbstractIn the tax policy debate, differentiation of value-added taxes is often justified by distributional concerns. Our quantitative analysis for Germany indicates that such concerns are misplaced. We find that the abolition of VAT differentiation has only negligible redistributive effects. Instead, reduced VAT are found to act as industry-specific subsidies. Whereas the overall welfare effects of pure VAT reforms are very small, a revenue-neutral introduction of a harmonised VAT combined with reductions in the marginal income tax rates or social security contributions turns out to produce substantial welfare gains for all households. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-30.
Date of creation: 2006
Date of revision:
VAT; tax reforms; distribution; efficiency; applied general equilibrium;
Other versions of this item:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-02-17 (Accounting & Auditing)
- NEP-ALL-2007-02-17 (All new papers)
- NEP-EEC-2007-02-17 (European Economics)
- NEP-PBE-2007-02-17 (Public Economics)
- NEP-PUB-2007-02-17 (Public Finance)
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