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Taxation And Welfare: Measuring The Effect Of Bulgaria’S 2007-08 Corporate-Personal Income Tax Reforms

Author

Listed:
  • Aleksandar VASILEV

    (University of Lincoln, United Kingdom)

Abstract

This paper utilizes a simple general-equilibrium model to analyse the long-run effects of Bulgaria’s 2007-08 corporate-personal income tax reforms. In particular, we consider the effect working through the firm’s capital structure and argue that the new reforms incentivize firms to increase investment, as the new regime benefits retained earnings. The increase in capital increases output and productivity, which in turn increases consumption and welfare. On average, households are enjoying 8.65% higher consumption in the new steady-state in the benchmark scenario. As a robustness check, we allow for a variable labour supply, where the gain increases further by additional 3.9% of consumption, to produce an overall gain of 13.55%.

Suggested Citation

  • Aleksandar VASILEV, 2019. "Taxation And Welfare: Measuring The Effect Of Bulgaria’S 2007-08 Corporate-Personal Income Tax Reforms," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 10(2), pages 113-117.
    • Handle: RePEc:srs:jtpref:v:10:y:2019:i:2:p:113-117
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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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