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A Revenue-neutral Shift from SSC to VAT: Analysis of the Distributional Impact for 12 EU-OECD Countries

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  • Fidel Picos-Sánchez
  • Alastair Thomas

Abstract

This paper assesses the distributional impact of a revenue-neutral shift from SSC to VAT in 12 EU-OECD countries. Using Household Budget Survey data, we simulate a 5-percentage-point SSC reduction funded by three alternative VAT reforms: an equal relative increase in all VAT rates, an increase in the standard VAT rate, and a shift to a uniform VAT rate. Our results suggest that all three reforms would be regressive in all 12 countries, that tax liabilities increase less for employees than for nonemployees, and that the uniform rate is the best for employees and the worst for nonemployees.

Suggested Citation

  • Fidel Picos-Sánchez & Alastair Thomas, 2015. "A Revenue-neutral Shift from SSC to VAT: Analysis of the Distributional Impact for 12 EU-OECD Countries," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(2), pages 278-298, June.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201506)71:2_278:arsfst_2.0.tx_2-8
    DOI: 10.1628/001522115X14186532237317
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    Citations

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    Cited by:

    1. Schock, Matthias Malte, 2019. "Steuerreformvorschläge des Mirrlees Committee und der Stiftung Marktwirtschaft [Tax Reform Proposals of the Mirrlees Committee and the Stiftung Marktwirtschaft]," MPRA Paper 96689, University Library of Munich, Germany.
    2. Tang, Yajun & Wang, Li & Shu, Haicheng, 2024. "“Tax reduction” and the financialization of real enterprises: Evidence from China’s “VAT reform”," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 835-850.
    3. Nico Pestel & Eric Sommer, 2017. "Shifting Taxes from Labor to Consumption: More Employment and more Inequality?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 542-563, September.
    4. Ruppert, Kilian & Stähler, Nikolai, 2022. "What drives the German current account? Household savings, capital investments and public policies," Economic Modelling, Elsevier, vol. 108(C).
    5. Ruppert, Kilian & Stähler, Nikolai, 2020. "Household savings, capital investments and public policies: What drives the German current account?," Discussion Papers 41/2020, Deutsche Bundesbank.
    6. Attinasi, Maria-Grazia & Prammer, Doris & Stähler, Nikolai & Tasso, Martino & Van Parys, Stefan, 2016. "Budget-neutral labour tax wedge reductions: A simulation-based analysis for selected euro area countries," Discussion Papers 26/2016, Deutsche Bundesbank.
    7. Maria-Grazia Attinasi & Doris Prammer & Nikolai Stähler & Martino Tasso & Stefan van Parys, 2019. "Budget-Neutral Labor Tax Wedge Reductions: A Sumulation-Based Analysis for the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 15(4), pages 1-54, October.

    More about this item

    Keywords

    tax reform; fiscal devaluation; redistribution; microsimulation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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