IDEAS home Printed from https://ideas.repec.org/p/bde/opaper/0702.html
   My bibliography  Save this paper

A simulation of the effects of the personal income tax reform on the tax burden

Author

Listed:
  • Isabel Argimón

    () (Banco de España)

  • Francisco de Castro

    () (Banco de España)

  • Ángel Luis Gómez

    () (Banco de España)

Abstract

The new Personal Income Tax Law came into force in January 2007. The main changes with respect to the previous regulation are the new tax treatment of personal and family circumstances and saving returns. This study aims to quantify the overall effect of the reform on tax revenue and to assess its redistributive impact by considering the different main income sources. In order to attain these objectives, we have used an Instituto de Estudios Fiscales sample of 2002 income tax returns to construct a baseline scenario for 2007 to simulate the reform. The reform will involve a moderate tax cut in relation to the baseline scenario. However, in relative terms, the tax reduction will be especially intense for lowest income and joint returns. Pensioners, recipients of business and professional incomes and dependent employees, though to a lower extent, would benefit from lower taxes. Lastly, the reform of the personal income tax is estimated to increase progressivity moderately, although lower tax revenues will imply lower redistributive capacity.

Suggested Citation

  • Isabel Argimón & Francisco de Castro & Ángel Luis Gómez, 2007. "A simulation of the effects of the personal income tax reform on the tax burden," Occasional Papers 0702, Banco de España;Occasional Papers Homepage.
  • Handle: RePEc:bde:opaper:0702
    as

    Download full text from publisher

    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/07/Fic/do0702.pdf
    File Function: First spanish version, March 2007
    Download Restriction: no

    More about this item

    Keywords

    personal income tax reform; cost of the reform; effective tax rates; income sources; population deciles;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:opaper:0702. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España). General contact details of provider: http://www.bde.es/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.