Dynamic effects of consumption tax reforms with durable consumption

2020 ◽  
Vol 20 (2) ◽  
Author(s):  
Qian Li
Keyword(s):  
Generation Model ◽  
Consumption Tax ◽  
Income Risk ◽  
Tax Reforms ◽  
Market Completeness ◽  
Durable Consumption ◽  
Poor Households ◽  
Borrowing Constraint ◽  
The Difference ◽  
Consumption Taxes

AbstractThis paper introduces durables into a dynamic general equilibrium overlapping generation model with idiosyncratic income shocks and endogenous borrowing constraints, which depend on durables. The aim of this paper is to evaluate the welfare effects of consumption tax reforms in a richer model that captures the difference between nondurable and durable consumption. When durables are considered, the standard results that a shift to consumption taxes is welfare improving are overturned. The mechanism of this opposing result is that consumption tax makes durable consumption more expensive without relaxing the borrowing constraint. The inability of borrowing to insure against income risk deviates the economy further away from market completeness and particularly hurts young and poor households. As a result, welfare decreases, coupled with negative redistribution.

Pass-through of Per Unit and ad Valorem Consumption Taxes: Evidence from Alcoholic Beverages in France

2013 ◽  
Vol 13 (2) ◽  
pp. 837-863 ◽  
Author(s):  
Clément Carbonnier
Keyword(s):  
Economic Theory ◽  
Imperfect Competition ◽  
Value Added ◽  
Alcoholic Beverages ◽  
Consumption Tax ◽  
Unit Consumption ◽  
Tax Reforms ◽  
Excise Taxes ◽  
Consumption Taxes ◽  
Ad Valorem

Abstract Economic theory states that in a market with imperfect competition, per unit consumption taxes should induce a greater increase in prices than ad valorem consumption taxes. This implies that consumers bear a greater share of the tax burden with per unit consumption taxes than that with ad valorem consumption taxes. This article seeks to test this theoretical result empirically using the French market for alcoholic beverages, which is subject to both per unit (excise taxes) and ad valorem (value-added tax, VAT) consumption taxes. Econometric analysis is applied to two consumption tax reforms affecting two distinct French markets for alcoholic beverages, those for beer and for aperitif. In 1995, the full rate of VAT increased from 18.6 to 20.6%; excise taxes on alcoholic beverages increased in 1997. Graphical evidence and econometric results confirm the statements of economic theory. For both classes of alcoholic beverages – beer and aperitif – the change in prices due to per unit excise taxes was significantly larger than that due to ad valorem VAT.

scholarly journals Measuring cost and affordability of current vs. healthy diets in Argentina: an application of linear programming and the INFORMAS protocol

2021 ◽  
Vol 21 (1) ◽  
Author(s):  
Gabriel Giacobone ◽  
Maria Victoria Tiscornia ◽  
Leila Guarnieri ◽  
Luciana Castronuovo ◽  
Sally Mackay ◽  
...  
Keyword(s):  
Linear Programming ◽  
Energy Intake ◽  
Current Model ◽  
Food Product ◽  
Poor Households ◽  
Average Household Income ◽  
Healthy Diets ◽  
Diet Cost ◽  
The Difference ◽  
Optimal Approach

Abstract Background Food cost and affordability is one of the main barriers to improve the nutritional quality of diets of the population. However, in Argentina, where over 60% of adults and 40% of children and adolescents are overweight or obese, little is known about the difference in cost and affordability of healthier diets compared to ordinary, less healthy ones. Methods We implemented the “optimal approach” proposed by the International Network for Food and Obesity/non-communicable diseases Research, Monitoring and Action Support (INFORMAS). We modelled the current diet and two types of healthy diets, one equal in energy with the current diet and one 6.3% lower in energy by linear programming. Cost estimations were performed by collecting food product prices and running a Monte Carlo simulation (10,000 iterations) to obtain a range of costs for each model diet. Affordability was measured as the percentage contribution of diet cost vs. average household income in average, poor and extremely poor households and by income deciles. Results On average, households must spend 32% more money on food to ensure equal energy intake from a healthy diet than from a current model diet. When the energy intake target was reduced by 6.3%, the difference in cost was 22%. There are no reasonably likely situations in which any of these healthy diets could cost less or the same than the current unhealthier one. Over 50% of households would be unable to afford the modelled healthy diets, while 40% could not afford the current diet. Conclusions Differential cost and affordability of healthy vs. unhealthy diets are germane to the design of effective public policies to reduce obesity and NCDs in Argentina. It is necessary to implement urgent measures to transform the obesogenic environment, making healthier products more affordable, available and desirable, and discouraging consumption of nutrient-poor, energy-rich foods.

scholarly journals Welfare optimization and multinational monopolies

1996 ◽  
Vol 38 (1) ◽  
pp. 16-25
Author(s):  
A. M. Russell ◽  
C. A. Martini ◽  
J. A. Rickard
Keyword(s):  
Parameter Space ◽  
Home Country ◽  
Domestic Market ◽  
Consumption Tax ◽  
Optimal Value ◽  
National Welfare ◽  
Consumption Taxes

AbstractThis paper examines the role of import tariffs and consumption taxes when a product is supplied to a domestic market by a foreign monopoly via a subsidiary. It is assumed that there is no competition in the domestic market from internal suppliers. The home country is able to levy a profits tax on the subsidiary. The objective of our analysis is to determine the mix of tariff and consumption tax which simultaneously maximizes national welfare. We show that national welfare does not have an internal maximum, but attains its maximum on a boundary of the consumption tax–tariff parameter space. Furthermore, the optimal value of national welfare increases as the tariff decreases and the consumption tax increases. The results obtained generalize the results of an earlier paper in which national welfare was maximized with respect to either a tariff or consumption tax, but not both.

scholarly journals Does Cutting the Tax Rate to Zero Induce Behavior Different from Other Tax Cuts? Evidence from Pakistan

2020 ◽  
Vol 102 (3) ◽  
pp. 426-441 ◽  
Author(s):  
Mazhar Waseem
Keyword(s):  
Low Income ◽  
Tax Evasion ◽  
Tax Reforms ◽  
Middle Income ◽  
Tax Rate ◽  
Taxable Income ◽  
Administrative Records ◽  
The Difference ◽  
Wage Earners ◽  
Tax Cuts

Using a series of Pakistani tax reforms and administrative records, I document that taxable income responses induced by to-zero tax cuts are orders of magnitude larger than ones induced by similar-sized other cuts. This finding is remarkably robust to alternative specifications and holds for both the self-employed and wage earners. I explore salience, selective enforcement, and discontinuous evasion costs as explanations of the observed behavior. I find that the data favor the last explanation. The difference between the two sets of responses is primarily driven by a large, discrete tax evasion response, which is included in the former but not in the latter behavior. I estimate the difference as a lower bound on tax evasion, showing that at least 70% of the income of low- and middle-income self-employed and 1% of low-income wage earners goes unreported.

Government Challenges Over Global Electronic Commerce Using FinTech

2022 ◽  
pp. 197-213
Author(s):  
Yeoul Hwangbo
Keyword(s):  
Electronic Commerce ◽  
Consumption Tax ◽  
Tax System ◽  
Consumption Taxes

The challenge over most countries has been legislating related acts and regulations on global electronic commerce taxation, but they have not implemented the consumption tax system for global electronic commerce so far. Consumer payment tax (CPT) is based on fintech and thereby proposed so that consumers can pay the consumption taxes to related taxation office of the countries in accordance with consumer country's jurisdiction principle, considering the CPT is assessed to satisfy most of the electronic commerce taxation criteria and has the potential to be applied to electronic commerce.

scholarly journals Tax Policy and Income Inequality in the Visegrad Countries

2015 ◽  
Vol 61 (6) ◽  
pp. 12-18
Author(s):  
Anna Moździerz
Keyword(s):  
Income Inequality ◽  
Tax Policy ◽  
Negative Impact ◽  
The State ◽  
Consumption Tax ◽  
Tax Reforms ◽  
Tax Rate ◽  
Recent Financial Crisis ◽  
The Impact ◽  
Visegrád Countries

Abstract The financialisation of economies is believed to be the primary cause of the increase in income inequality in the world, occurring on a scale unseen for more than 30 years. One can hypothesise that it is the state that is responsible for the widening inequality, as the state has not sufficiently used the redistributive function of taxation. The purpose of this paper is to study the impact of tax policy on income inequality in Poland, the Czech Republic, Slovakia and Hungary. These so-called Visegrad countries have, in the last several years, carried out some controversial experiments with tax policy, specifically in terms of the flattening of tax progressivity or its replacement with a flat tax, which led to the weakening of the income adjustment mechanism. The imbalance between income tax and consumption tax has contributed to perpetuating income inequality. The verification of tax systems carried out during the recent financial crisis has forced the countries included in this research to implement tax reforms. The introduced changes caused various fiscal and redistributive effects. Analyses show that the changes in income taxation and an increase in the consumption tax rate had the most negative impact on the income and asset situation in Hungary.

scholarly journals Tax Reform and Automatic Stabilization

2002 ◽  
Vol 92 (3) ◽  
pp. 411-433 ◽  
Author(s):  
Thomas J Kniesner ◽  
James P Ziliak
Keyword(s):  
Income Tax ◽  
Panel Study ◽  
Welfare Cost ◽  
Risk Averse ◽  
Income Dynamics ◽  
Income Risk ◽  
Tax Reforms ◽  
Automatic Stabilization ◽  
Consumption Insurance ◽  
Federal Income Tax

An income tax provides implicit insurance by dampening the variability of disposable income and consumption. Using an empirical framework derived from the consumption insurance literature and data from the Panel Study of Income Dynamics we examine the effect of federal income tax reforms of the 1980's on automatic stabilization of consumption. Overall, ERTA and TRA86 reduced consumption stability by about 50 percent. Recently increased EITC generosity restored or enhanced consumption insurance. The welfare cost of moving to the post-TRA86 system is sizable for relatively risk-averse households facing large income risk but is much more modest for the typical household.

IDEAL VERSUS ACTUAL: THE CONTRADICTION IN NUMBER OF CHILDREN BORN TO NIGERIAN WOMEN

2010 ◽  
Vol 43 (2) ◽  
pp. 233-245 ◽  
Author(s):  
LATIFAT IBISOMI ◽  
STEPHEN GYIMAH ◽  
KANYIVA MUINDI ◽  
JONES ADJEI
Keyword(s):  
Family Size ◽  
Child Death ◽  
Demographic And Health Surveys ◽  
Nigerian Women ◽  
Number Of Children ◽  
Fertility Desires ◽  
Poor Households ◽  
The Difference ◽  
Desired Family Size ◽  
Late Childbearing

SummaryAlthough desired family size is often different from actual family size, the dynamics of this difference are not well understood. This paper examines the patterns and determinants of the difference between desired and actual number of children (unmet fertility desires) among women aged 15–49 years using pooled data from the 1990, 1999 and 2003 Nigeria Demographic and Health Surveys (NDHSs). The results show that more than two-thirds of the sample have unmet fertility desires (18.1% have more while 52.4% have fewer than desired). It was found that early and late childbearing increased the odds of unmet fertility desires. Also, women with low levels of education, from poor households, rural residents as well as those who had experienced child death were at a higher risk of unmet fertility desires in the multivariate context. The study highlights the policy and programme implications of the findings.

scholarly journals Commodity Taxation under Habit Formation and Myopia

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Helmuth Cremer ◽  
Philippe De Donder ◽  
Dario Maldonado ◽  
Pierre Pestieau
Keyword(s):  
Habit Formation ◽  
Consumption Tax ◽  
Negative Externalities ◽  
Commodity Taxation ◽  
Second Best ◽  
Lump Sum ◽  
Redistributive Effects ◽  
Consumption Taxes ◽  
Second Period ◽  
Period Model

Abstract This paper analyzes the pattern of consumption taxes in a two period model with habit formation and myopia. An individual’s second-period needs increase with first period consumption. However, myopic individuals do not see this habit formation relation when they take their saving decision. The first-best solution is decentralized by a simple “Pigouvian” (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. Taxes should discourage consumption of goods that entail negative externalities (unforeseen habits), but instead they discourage less the consumption of goods that are proportionately consumed by individuals with high net social marginal utility of income. Both myopic and farsighted individuals may benefit more from the second-best policy as the proportion of myopic agents in society increases.

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