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Marginal indirect tax reform analysis with merit good arguments and environmental concerns: Norway, 1999




We present a framework to identify and evaluate marginal tax reforms when merit good arguments and environmental concerns are given explicit consideration. It is applied to the Norwegian indirect tax system for 1999. The analysis shows that the reform passed in Parliament in November 2000 had a clear redistributive profile: a lowering of the VAT rate on food items and the introduction of a VAT on services benefits households in the lowest seven deciles while the upper three deciles got worse off. But we also argue that the aggregate demand responses triggered an increase in greenhouse gasses. Next, we show that if the 2000 reform had been complemented with tax rates rate changes on other products, it could have made every decile better off. Finally, we present socially optimal reforms, under different weights on inequality and the environment.

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  • Fred Schroyen & Jørgen Aasness, 2006. "Marginal indirect tax reform analysis with merit good arguments and environmental concerns: Norway, 1999," Discussion Papers 455, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:455

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    1. André DECOSTER & Erik SHCOKKAERT, 1989. "Equity and efficiency of a reform of Belgian indirect taxes," Discussion Papers (REL - Recherches Economiques de Louvain) 1989023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Aasness, Jorgen & Bye, Torstein & Mysen, Hans Terje, 1996. "Welfare effects of emission taxes in Norway," Energy Economics, Elsevier, vol. 18(4), pages 335-346, October.
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    indirect tax reform; merit good arguments; greenhouse gasses;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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