IDEAS home Printed from https://ideas.repec.org/p/rif/report/172.html

The Societal Costs of Taxation – What Do We Know About the Adverse Effects of Finnish Taxes

Author

Listed:
  • Ropponen, Olli

Abstract

This report examines the benefits of different types of taxes in relation to their adverse effects, using a modeling framework and the international economic research literature. The basis for the study is literature on the causal effects of different tax types on their respective tax bases. These effects play a central role in determining the welfare losses caused by taxation and are therefore at the core of assessing the adverse effects of taxation. The modeling framework, in turn, makes it possible to incorporate causal effects directly into welfare analysis without the need for information that is less commonly reported in empirical studies, such as so-called compensated effects. The report examines several different types of taxes which, taken together, account for 84 percent of all taxes and tax-like revenues projected for the Finnish central government in 2026. Based on the results, clear differences are observed in the balance between benefits and adverse effects, both across different types of taxes and across different groups of taxpayers.

Suggested Citation

  • Ropponen, Olli, 2026. "The Societal Costs of Taxation – What Do We Know About the Adverse Effects of Finnish Taxes," ETLA Reports 172, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:172
    as

    Download full text from publisher

    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-172.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reetta Varjonen-Ollus, 2025. "Behavioural Effects of a Top Marginal Income Tax Rate Increase," Working Papers 39, Finnish Centre of Excellence in Tax Systems Research.
    2. Varjonen-Ollus, Reetta, 2025. "Behavioural Effects of a Top Marginal Income Tax Rate Increase," Working Papers 180, VATT Institute for Economic Research.
    3. J. E. Stiglitz & P. Dasgupta, 1971. "Differential Taxation, Public Goods, and Economic Efficiency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 151-174.
    4. Trabandt, Mathias & Uhlig, Harald, 2011. "The Laffer curve revisited," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 305-327.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bjart Holtsmark, 2019. "Is the marginal cost of public funds equal to one?," Discussion Papers 893, Statistics Norway, Research Department.
    2. Laczó, Sarolta & Rossi, Raffaele, 2020. "Time-consistent consumption taxation," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 194-220.
    3. Sebastian Dyrda & Marcelo Pedroni, 2015. "Optimal Fiscal Policy in a Model with Uninsurable Idiosyncratic Shocks," Working Papers tecipa-550, University of Toronto, Department of Economics.
    4. Hans A. Holter & Dirk Krueger & Serhiy Stepanchuk, 2019. "How do tax progressivity and household heterogeneity affect Laffer curves?," Quantitative Economics, Econometric Society, vol. 10(4), pages 1317-1356, November.
    5. Oguzhan Akgun & David Bartolini & Boris Cournède, 2017. "The capacity of governments to raise taxes," OECD Economics Department Working Papers 1407, OECD Publishing.
    6. Stephie Fried & Kevin Novan & William B. Peterman, 2021. "Recycling Carbon Tax Revenue to Maximize Welfare," Finance and Economics Discussion Series 2021-023, Board of Governors of the Federal Reserve System (U.S.).
    7. Michael P. Devereux, 2008. "Taxation of outbound direct investment: economic principles and tax policy considerations," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(4), pages 698-719, winter.
    8. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    9. Gaspar, Ví­tor & Afonso, António, 2006. "Excess burden and the cost of inefficiency in public services provision," Working Paper Series 601, European Central Bank.
    10. Ming Chung Chang & Shufen Wu, 2011. "Should Marginal Cost of Public Funds include the Revenue Effect?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(1), pages 1-16, March.
    11. Burkhard Heer & Andreas Irmen & Bernd Süssmuth, 2023. "Explaining the decline in the US labor share: taxation and automation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1481-1528, December.
    12. Kirdan Lees, 2013. "Fighting fit? Assessing New Zealand’s fiscal sustainability," NZIER Working Paper 2013/5, New Zealand Institute of Economic Research.
    13. Stiglitz, Joseph E., 2002. "New perspectives on public finance: recent achievements and future challenges," Journal of Public Economics, Elsevier, vol. 86(3), pages 341-360, December.
    14. Ghassibe, Mishel & Zanetti, Francesco, 2022. "State dependence of fiscal multipliers: the source of fluctuations matters," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 1-23.
    15. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    16. Freitas, Bruno, 2020. "Labour Share Heterogeneity and Fiscal Consolidation Programs," MPRA Paper 98973, University Library of Munich, Germany.
    17. Demetrio Guzzardi & Elisa Palagi & Tommaso Faccio & Andrea Roventini, 2023. "In search of lost time: An ensemble of policies to restore fiscal progressivity and address the climate challenge," LEM Papers Series 2023/28, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    18. Emmanuel Ekow Asmah & Francis Kwaw Andoh & Edem Titriku, 2020. "Trade misinvoicing effects on tax revenue in sub‐Saharan Africa: The role of tax holidays and regulatory quality," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(4), pages 649-672, December.
    19. Selahattin Imrohoroglu, 2017. "Replacing Income Taxation with Consumption Taxation in Japan," CIGS Working Paper Series 17-008E, The Canon Institute for Global Studies.
    20. Daniel, Betty C. & Shiamptanis, Christos, 2013. "Pushing the limit? Fiscal policy in the European Monetary Union," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2307-2321.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

    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:rif:report:172. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kaija Hyvönen-Rajecki (email available below). General contact details of provider: https://edirc.repec.org/data/etlaafi.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.