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The Built-Flexibility of Consumption Taxes


  • Creedy, J.
  • Gemmell, N.


The purpose of this paper is to extend the analysis of built-in flexibility to various forms of consumption taxation. This is useful in view of the extensive use of indirect taxes. Section 2 begins with basic definitions and a discussion of income taxation, concentrating on the multi-step case. This is needed in view of the fact that consumption is from income net of income taxation. Section 3 extends the analysis to include ad valorem and unit consumption taxes. Section 4 examines the implications for the revenue ealsticity of changes in indirect tax rates. Some illustrative calculations are reported in section 5. Section 6 briefly concludes.

Suggested Citation

  • Creedy, J. & Gemmell, N., 1999. "The Built-Flexibility of Consumption Taxes," Department of Economics - Working Papers Series 704, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:704

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D30 - Microeconomics - - Distribution - - - General


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