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Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland


  • Wasiu Adekunle Are


The composition of tax revenue in Ireland had changed dramatically over the past decade, with indirect taxes accounting for a large share of total tax revenue. This shift towards indirect taxation more than direct taxation tends to put excessive burden on the poor, thereby raising the concern about equity implications of the Irish indirect tax systems. In this paper, we utilize Consumption Dominance curve techniques to analyse the impact of marginal indirect tax changes on poverty in Ireland , using the Irish Household Budget Survey data of 1999 and 2005 periods. Using this technique, which is based on the theory of stochastic dominance, we examined the pairwise comparison of different combinations of commodities for both the overall population and the subgroups of population. The technique helps us to identify the directions of indirect marginal tax changes which will reduce poverty for some selected commodities over a broad class of poverty measures and poverty lines.

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  • Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers 201230, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:201230

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    References listed on IDEAS

    1. Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 227-243, April.
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    3. Paul Makdissi & Stéphane Mussard, 2006. "Between-Group Transfers and Poverty-Reducing Tax Reforms," Cahiers de recherche 06-23, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    4. Paolo Liberati, 2003. "Poverty Reducing Reforms and Subgroup Consumption Dominance Curves," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 589-601, December.
    5. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
    6. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2005. "Poverty-Reducing Tax Reforms with Heterogeneous Agents," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 107-116, February.
    7. Eimear Leahy & Seán Lyons & Richard S. J. Tol, 2011. "The Distributional Effects of Value Added Tax in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 42(2), pages 213-235.
    8. Duclos, Jean-Yves & Makdissi, Paul & Araar, Abdelkrim, 2009. "Pro-Poor Tax Reforms, with an Application to Mexico," IZA Discussion Papers 4511, Institute for the Study of Labor (IZA).
    9. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2008. "Socially Improving Tax Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1505-1537, November.
    10. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, vol. 75(2), pages 227-235, April.
    11. Callan, Tim & Lyons, Sean & Scott, Susan & Tol, Richard S.J. & Verde, Stefano, 2009. "The distributional implications of a carbon tax in Ireland," Energy Policy, Elsevier, vol. 37(2), pages 407-412, February.
    12. Yitzhaki, Shlomo & Slemrod, Joel, 1991. "Welfare Dominance: An Application to Commodity Taxation," American Economic Review, American Economic Association, vol. 81(3), pages 480-496, June.
    13. Madden, David, 1996. "Marginal Tax Reform and the Specification of Consumer Demand Systems," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 556-567, October.
    14. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2003. "Poverty-Efficient Transfer Programs: The Role of Targeting and Allocation Rules," Cahiers de recherche 0305, CIRPEE.
    15. Callan, Tim & Keeney, Mary J. & Nolan, Brian & Maitre, Bertrand, 2004. "Why is Relative Income Poverty so High in Ireland?," Research Series, Economic and Social Research Institute (ESRI), number PRS53.
    16. Paul Makdissi & Stéphane Mussard, 2008. "Analyzing the impact of indirect tax reforms on rank-dependent social welfare functions: a positional dominance approach," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(3), pages 385-399, April.
    17. David Madden, 1995. "An analysis of indirect tax reform in Ireland in the 1980s," Fiscal Studies, Institute for Fiscal Studies, vol. 16(1), pages 18-37, May.
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    Consumption dominance curve; Poverty; Indirect marginal tax;

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