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Modelling Personal Income Taxation in Spain:Revenue Elasticities and Regional Comparisons


  • John Creedy
  • José Félix Sanz?Sanz


This paper derives analytical expressions for the revenue elasticity of the Spanish personal income tax system, as applied to tax units and in aggregate. This is complicated by the schedular nature of the system, and the role of central and regional governments, along with the existence of a range of tax credits and eligible expenditures and deductions. Empirical estimates are obtained using a cros -sectional dataset which enables a number of important ancillary elasticities (relating to allowances and tax credits, and different income sources) to be estimated. It was found that there is considerable variation among tax units in the revenue elasticity, with highly (positively) skewed distributions. The nature of the distributions varies among regions of Spain, and the aggregate elasticities for each region were found to display some variation associated with income distribution differences. The national aggregate is found to be around 1.3. The paper also derives aggregate tax revenue as a function of characteristics of the distribution of taxable income in each region. This allows the sources of revenue differences among regions to be identified.

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  • John Creedy & José Félix Sanz?Sanz, 2010. "Modelling Personal Income Taxation in Spain:Revenue Elasticities and Regional Comparisons," Department of Economics - Working Papers Series 1097, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1097

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