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Income Tax Deductions for Work‐related Expenses: The Rationale Examined

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  • Jonathan Baldry

Abstract

The Australian income tax permits taxpayers receiving wages to claim work‐related expenses (WREs) as deductions against taxable income. The rationale for the provision has never been stated. This paper examines the rationale in terms of equity and efficiency considerations. The analy sis suggests that deductibility of WREs is likely, at best, to have a neutral equity impact; at worst it will have a random impact. WRE deductibi lity is also likely to lead to distortions in both production and consumption. Taken together with the high compliance costs associated with the provision, these arguments justify abolition of WRE deductibility

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  • Jonathan Baldry, 1998. "Income Tax Deductions for Work‐related Expenses: The Rationale Examined," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 45-57, March.
    • Handle: RePEc:bla:ausecp:v:37:y:1998:i:1:p:45-57
    DOI: 10.1111/1467-8454.00005
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    Cited by:

    1. Wolfram Richter, 2006. "Efficiency effects of tax deductions for work-related expenses," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(6), pages 685-699, November.
    2. Wrede, Matthias, 1999. "A note on reliefs for traveling expenses to work," BERG Working Paper Series 30, Bamberg University, Bamberg Economic Research Group.
    3. Heuermann, Daniel F. & Assmann, Franziska & vom Berge, Philipp & Freund, Florian, 2017. "The distributional effect of commuting subsidies - Evidence from geo-referenced data and a large-scale policy reform," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 11-24.
    4. Homburg, Stefan, 2008. "Die Entfernungspauschale als steuertheoretische Herausforderung," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 45-53.
    5. Voßmerbäumer, Jan & Wagner, Franz W., 2013. "Steuerwirkungen betrieblicher Entgeltpolitik," arqus Discussion Papers in Quantitative Tax Research 144, arqus - Arbeitskreis Quantitative Steuerlehre.
    6. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.

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