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Horizontal Inequity and Vertical Redistribution with Indirect Taxes: the Greek Case

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  • Kaplanoglou, G.
  • Newbery , D.M.

Abstract

Non-uniform indirect taxes treat equals and those unequal differently (horizontal inequity and vertical redistribution). Horizontal inequity is caused by taste differences among similar households, but some excises are designed to reflect social, not revealed, preferences. We apply two methodologies for decomposing the overall redistributive effect of the present and three alternative indirect tax structures into vertical and horizontal effects for Greece, using the Household Expenditure Survey micro-database. In all cases the taste component is considerable, even when we allow for social preferences, while improvements in vertical redistribution can be achieved, albeit at the cost of increased horizontal inequity.

Suggested Citation

  • Kaplanoglou, G. & Newbery , D.M., 2008. "Horizontal Inequity and Vertical Redistribution with Indirect Taxes: the Greek Case," Cambridge Working Papers in Economics 0806, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0806
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    References listed on IDEAS

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    1. Creedy, J. & Lambert, P.J. & Van de Ven, J., 1998. "The Redistributive Effect of Taxation Revisited," Department of Economics - Working Papers Series 657, The University of Melbourne.
    2. Wagstaff, Adam & van Doorslaer, Eddy & van der Burg, Hattem & Calonge, Samuel & Christiansen, Terkel & Citoni, Guido & Gerdtham, Ulf-G. & Gerfin, Michael & Gross, Lorna & Hakinnen, Unto, 1999. "Redistributive effect, progressivity and differential tax treatment: Personal income taxes in twelve OECD countries," Journal of Public Economics, Elsevier, vol. 72(1), pages 73-98, April.
    3. Jérôme Adda & Francesca Cornaglia, 2006. "Taxes, Cigarette Consumption, and Smoking Intensity," American Economic Review, American Economic Association, vol. 96(4), pages 1013-1028, September.
    4. Nicholas Stern, 1990. "Uniformity Versus Selectivity In Indirect Taxation," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 83-108, March.
    5. Newbery, David M, 1988. "Charging for Roads," World Bank Research Observer, World Bank Group, vol. 3(2), pages 119-138, July.
    6. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 471-493, July.
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    Cited by:

    1. repec:col:000093:015846 is not listed on IDEAS
    2. Bernardi, Luigi, 2009. "Le tasse in Europa dagli anni novanta
      [Taxation in Europe since the Years 1990s]
      ," MPRA Paper 23441, University Library of Munich, Germany.
    3. Luis Huesca & Arturo Robles Valencia & Abdelkrim Araar, 2015. "Progressivity and decomposition of VAT in the Mexican border, 2014," Estudios Regionales en Economía, Población y Desarrollo. Cuadernos de Trabajo de la Universidad Autónoma de Ciudad Juárez. 25, Cuerpo Académico 41 de la Universidad Autónoma de Ciudad Juárez, revised 01 Jan 2015.

    More about this item

    Keywords

    distributional effect of taxes; horizontal inequality; vertical redistribution; indirect tax reform; Greece.;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D30 - Microeconomics - - Distribution - - - General

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