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On the fairness and the redistributive effects of PIT in Central and Eastern European countries

Author

Listed:
  • Stoian, Andreea
  • Vintila, Nicoleta
  • Tatu, Lucian
  • Miricescu, Emilian

Abstract

The aim of this paper is to investigate the fairness and the redistributive effects of personal income tax (PIT) in seven Central and Eastern European countries, namely: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania and Romania. Following Kakwani and Lambert (1998) methodology, we test tax equity and progressivity. We study the asymmetry of salary income distribution in order to examine the horizontal equity among individuals in the same group. We calculate the Gini coefficients in order to investigate the redistributive effects of PIT regulatory frameworks. We find that tax equity is fulfilled by all countries. However, PIT regulations does not allow for strong progressivity and for redistributive effects.

Suggested Citation

  • Stoian, Andreea & Vintila, Nicoleta & Tatu, Lucian & Miricescu, Emilian, 2018. "On the fairness and the redistributive effects of PIT in Central and Eastern European countries," MPRA Paper 86568, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:86568
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    File URL: https://mpra.ub.uni-muenchen.de/86568/1/MPRA_paper_86568.pdf
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    References listed on IDEAS

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    1. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
    2. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
    3. Musgrave, Richard A., 1990. "Horizontal Equity, Once More," National Tax Journal, National Tax Association, vol. 43(2), pages 113-22, June.
    4. Alan J. Auerbach & Kevin A. Hassett, 2002. "A New Measure of Horizontal Equity," American Economic Review, American Economic Association, vol. 92(4), pages 1116-1125, September.
    5. Jaanika Merik├╝ll & Karsten Staehr, 2010. "Unreported Employment and Envelope Wages in Mid-Transition: Comparing Developments and Causes in the Baltic Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 637-670, December.
    6. King, Mervyn A, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," Econometrica, Econometric Society, vol. 51(1), pages 99-115, January.
    7. Jean-Yves Duclos & Peter J. Lambert, 2000. "A normative and statistical approach to measuring classical horizontal inequity," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 87-113, February.
    8. Kakwani, Nanak & Lambert, Peter J., 1998. "On measuring inequity in taxation: a new approach," European Journal of Political Economy, Elsevier, vol. 14(2), pages 369-380, May.
    9. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(2), pages 139-154, June.
    10. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
    11. Musgrave, Richard A., 1990. "Horizontal Equity, Once More," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(2), pages 113-122, June.
    12. Slesnick, Daniel T, 1989. "The Measurement of Horizontal Inequality," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 481-490, August.
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    More about this item

    Keywords

    horizontal equity; vertical equity; personal income tax; income distribution; inequality; Gini; Central and Eastern European;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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