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Redistributing Income through VAT

Author

Listed:
  • Cuceu IonuÅ£-Constantin

    ("BabeÅŸ-Bolyai" University Cluj-Napoca)

  • Văidean Viorela-Ligia

    ("BabeÅŸ-Bolyai" University Cluj-Napoca)

Abstract

This article analyzes from a theoretical point of view the incidence of the value added tax on the current expenditure and income of the households when applying reduced rates and exceptions from this tax for some prevalent goods from the consumption of households with small income. The replacement of the standard VAT rate with reduced rates and exemptions for such goods reduces the regressive character of this tax related to the current income (and increases the progressivity degree of the tax in relation to the current expenditures of households), when the size and the structure of consumption remains unchanged.

Suggested Citation

  • Cuceu IonuÅ£-Constantin & Văidean Viorela-Ligia, 2018. "Redistributing Income through VAT," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 588-592, December.
    • Handle: RePEc:ovi:oviste:v:xviii:y:2018:i:2:p:588-592
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    References listed on IDEAS

    as
    1. André Decoster & Jason Loughrey & Cathal O'Donoghue & Dirk Verwerft, 2010. "How regressive are indirect taxes? A microsimulation analysis for five European countries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(2), pages 326-350.
    2. Cláudia Braz & Jorge Correia da Cunha, 2009. "The Redistributive Effects of VAT in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    3. Georgia Kaplanoglou, 2015. "Who Pays Indirect Taxes in Greece? From EU Entry to the Fiscal Crisis," Public Finance Review, , vol. 43(4), pages 529-556, July.
    4. 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.
    5. IonuÈ›-Constantin Cuceu, 2016. "The Distributional Effects of Value Added Tax," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 450-454, February.
    6. Institute for Fiscal Studies, 2011. "A retrospective evaluation of elements of the EU VAT system," Taxation Studies 0039, Directorate General Taxation and Customs Union, European Commission.
    7. Nicolas Ruiz & Alain Trannoy, 2008. "Le caractère régressif des taxes indirectes : les enseignements d'un modèle de microsimulation," Économie et Statistique, Programme National Persée, vol. 413(1), pages 21-46.
    8. Neil Warren, 2008. "A Review of Studies on the Distributional Impact of Consumption Taxes in OECD Countries," OECD Social, Employment and Migration Working Papers 64, OECD Publishing.
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    More about this item

    Keywords

    tax; regressive; income; expenditure;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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