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From Income Tax to Consumption Tax?. The Case of Jamaica

  • Roy Bahl
  • Sally Wallace

Over the past decade, a number of countries have shifted to single-rate tax systems with broader bases and lower rates. In the U.S., there continues to be discussion of the merits of a consumption tax, and of base-broadening reforms to the income tax system. The objective of this paper is to demonstrate how, over time, a conventional income tax could be converted to a flat-rate consumption tax in a developing country. The value of this analysis, we hope, comes with the use of a real-world situation (Jamaica), which allows us to focus on the detail that determines the feasibility of transitioning to a flat-rate tax on consumption. Our main contribution is to show the conditions under which the switch can be revenue-neutral.

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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 63 (2007)
Issue (Month): 3 (September)
Pages: 396-414

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200709)63:3_396:fittct_2.0.tx_2-l
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  1. Dillon Alleyne & James Alm & Roy Bahl & Sally Wallace, 2004. "Tax Burden in Jamaica," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0434, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Charles E. McLure, Jr. & George R. Zodrow, 2007. "Consumption-based Direct Taxes: A Guided Tour of the Amusement Park," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(2), pages 285-307, June.
  3. Sally Wallace & James Alm, 2004. "The Jamaican Individual Income Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0430, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Thomas F. Rutherford & Miles K. Light & Felipe Barrera Osorio, 2003. "Equity and effciency costs of raising tax revenue in Colombia," INFORMES DE INVESTIGACIÓN 002583, FEDESARROLLO.
  5. Richard Bird & Pierre-Pascal Gendron, 2006. "Is VAT the Best Way to Impose a General Consumption Tax in Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0618, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. Ricardo Varsano & Kevin Kim & Michael Keen, 2006. "The "Flat Tax(es)"; Principles and Evidence," IMF Working Papers 06/218, International Monetary Fund.
  7. Zodrow, George R. & McLure, Charles E. Jr., 1988. "Implementing direct consumption taxes in developing countries," Policy Research Working Paper Series 131, The World Bank.
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