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Incidence of a "Social VAT" Reform: A French Scenario

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  • Rebiere, Therese

    (CNAM, Paris)

Abstract

This paper studies the fiscal incidence of a fiscal reform consisting of a reduction in employers' social insurance contributions financed by a tax based on the value added. In a closed economy with two sectors calibrated thanks to the French National Accounts, a "social VAT" leads to a rise in labor incomes which is usually higher than the rise of capital incomes. In case of perfect intersector mobility of production factors, a reduction in 1 percentage point of the social contributions leads to a rise in net labor incomes which is 0:51 to 0:66 percentage point higher than the rise of the interest rate. For a low intersector mobility the gains of workers, even though unequally distributed, remain higher than that of capitalists. In an open economy when the international capital mobility is sufficiently high, workers are more inclined to suffer from the reform.

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  • Rebiere, Therese, 2013. "Incidence of a "Social VAT" Reform: A French Scenario," IZA Discussion Papers 7127, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7127
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    2. Stéphane Gauthier, 2009. "Un exercice de TVA sociale," Économie et Prévision, Programme National Persée, vol. 187(1), pages 65-81.
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    4. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    5. Peter M. Mieszkowski, 1967. "On the Theory of Tax Incidence," Journal of Political Economy, University of Chicago Press, vol. 75(3), pages 250-250.
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    More about this item

    Keywords

    fiscal incidence; social contribution; payroll tax; tax on value added; social VAT;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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