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2 edition of relative impact of income and consumption taxes found in the catalog.

relative impact of income and consumption taxes

International Monetary Fund.

relative impact of income and consumption taxes

by International Monetary Fund.

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  • 17 Currently reading

Published by International Monetary Fund in Washington, D.C .
Written in


Edition Notes

Statementprepared by Hirofumi Shibata and Aiko Shibata.
SeriesIMF working paper -- WP/88/24
ContributionsShibata, Hirofumi., Shibata, Aiko., International Monetary Fund. Fiscal Affairs Dept.
The Physical Object
Pagination16 p. --
Number of Pages16
ID Numbers
Open LibraryOL18245530M

  Extrapolating from these estimates using the relative spending responses across goods observed in and extrapolating similarly over time, our estimates predict that the receipt of the tax rebates directly raised non durable PCE by percent in the second quarter of and will raise it by percent in the third quarter (2). -Since 1/(1 + r) is the relative price of future consumption goods in terms of current consumption goods, a change in the real interest rate effectively changes this intertemporal relative price - A change in the real interest rate will also have both income and substitution effects.

Total Tax Revenue. US taxes are low relative to those in other developed countries (figure 1). In , taxes at all levels of US government represented 26 percent of gross domestic product (GDP), compared with an average of 33 percent for the 35 member countries of the Organisation for Economic Co-operation and Development (OECD).   To do so, individual states charge an income tax, consumption taxes (such as sales and use tax), or a combination of both. The average revenue collected by states from consumption tax vs. income tax is currently 30 percent and 41 percent, respectively. However, these percentages could change drastically as state collection trends begin to surface.

8. The recommendation to shift away from trade taxes towards domestic consumption and income taxes reflects the consensual view that trade taxes are a relatively inefficient way of raising revenue. Nevertheless, despite the theoretical argument for a simultaneous tariff and tax Cited by: Taxes can be evaluated based on an average impact or a marginal impact and can be categorized as progressive, regressive, or proportional. An average tax rate is the ratio of the total amount of taxes paid, T, to the total tax base, P, whereas the marginal tax rate equals the change in taxes, divided by the change in tax base.


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Relative impact of income and consumption taxes by International Monetary Fund. Download PDF EPUB FB2

This paper examines the possibility of ascertaining the welfare changes that occur when a consumption tax replaces an equal-yield income tax. It finds that those with saving/income ratios greater than the social saving/income ratio under the income tax will surely benefit and those with ratios smaller than the social rate under the consumption tax will surely be harmed.

Growth Effects of Income and Consumption Taxes. The effects of income and consumption taxation are examined in the context of models in which the growth process is driven by the accumulation of human and physical capi- tal.

The different channels through which these taxes affect economic growth are dis- cussed. The below mentioned article provides quick notes on the relative income hypothesis. Under the relative income hypothesis, consumption is a function of current income relative to the highest level of income previously attained.

Several versions of the relative income hypothesis exist. While true, the long term effects of a consumption tax would be a greater accumulation of savings, more capital to invest, and an economy that is fundamentally stronger than one using an income tax system.

Several European nations have used a derivation of a consumption tax, the Value-Added-Tax. A consumption and income tax with broad bases can be similar depending on an individual’s saving behavior.

An individual who saves no money at all would experience no difference between an income and a consumption tax. Without savings, consumption is equal to income. AFile Size: KB. income arrives, consumption is constant. In contrast, new information about future income available in period t induces the consumer to update the optimal consumption plan.

The impact of the income revisions is proportional to an annuitization factor (which depends on the interest rate and the consumers’ horizon).

When the horizon is infinite, thisFile Size: KB. And in fact, when economists look at the transition from an income tax to consumption tax, most of the gain to productivity comes from this tax on old savings, this tax on old capital, and the reason that Congress got excited about this, because it’s a tax that can’t be avoided.

It is calculated by dividing total corporate income tax revenues by GDP and then dividing this by the general corporate income tax rate (AfDB, ).

Compliance costs The expenditure of time or money to conform to government requirements. For taxes, this could include registration, filing returns, keeping records, etc.

Consumption tax, e.g. VAT. the tax impact on household income is a theme with a distinct applied science character in view of its importance for personal opportunities in terms of consumption, savings andAuthor: Mariyana Pavlova.

Japan, for example, added a 3% consumption tax to its income tax in The Japanese Consumption Tax (JCT) rose to 5% in Ina two-part tax increase to double the tax raised it first Author: Julia Kagan.

By clicking on the option labelled ‘Relative’, you can see the relative importance of the different tax instruments. As it can be appreciated, income taxation became an important source of revenue in the second half of the 20th century, although consumption taxation grew faster than income taxation throughout this period.

Arnold () entered indicators of the tax structure into a set of panel growth regressions for a sample of 21 OECD countries over the period – and found that property taxes are the most growth-friendly, followed by consumption taxes and then by personal income taxes.

At the same time corporate income taxes appear to have the most Cited by: 8. ADVERTISEMENTS: Effects of Taxes: The most important objective of taxation is to raise required revenues to meet expendi­tures.

Apart from raising revenue, taxes are considered as instruments of control and regulation with the aim of influencing the pattern of consumption, production and distribution.

Taxes thus affect an economy in various ways, although the effects of [ ]. The Impact of Personal Income Tax on State Governments Revenue Profile in Nigeria Article (PDF Available) in SSRN Electronic Journal November with 7, Reads How we measure 'reads'Author: Muhammad Tanko.

income taxes and corporate income taxes reduce income inequality. The effect of corporate income taxes seems to be eroded away in open or globalized economies. We also generally find that general consumption taxes, excise taxes and customs duties have a negative impact on income Size: 1MB.

Estimates of the impact on the household sector suggest that a one point increase in the consumption tax rate would push consumer prices up by %. The consequent fall in real incomes would depress real consumer spending by % and real GDP by % in the first year.

Taxes are the primary source of revenue for most governments. Governments also use taxes to establish income equity and modify consumption decisions. Key Terms. sales tax: A local or state tax imposed as a percentage of the selling price of goods or services payable by the customer.

The tax is not recognized as the seller’s earnings; the seller only collects the tax and transmits the same to local or state. In the United States, individual income taxes (federal, state, and local) were the primary source of tax revenue inat percent of total tax revenue.

Social insurance taxes made up the second-largest share, at percent, followed by consumption taxes, at percent, and property taxes. A Two-Period Model Consumers Experiments Introduction Intertemporal Decisions Macroeconomics studies how key variables evolve over time The simplest way to think about intertemporal decisions is in a two-period model The first period is the current period (or today) The second period represents the future (or tomorrow) Key trade-off: consuming today or consuming in the future,File Size: 1MB.

Research examining the connections among taxes, consumption, and labor supply is of further interest in light of the burgeoning macroeconomics literature on precautionary saving. In aggregate data current consumption tracks current income closely, contrary to the standard life-cycle permanent income model of consumption (Carroll and Summers ).Cited by:.

Income–consumption curve for different types of goods. In the case illustrated with the help of Figure 1 both X 1 and X 2 are normal goods in which case, the demand for the good increases as money income rises.

However, if the consumer has different preferences, he has the option to choose X 0 or X + on budget line B2. As the income of the consumer rises, and the consumer chooses X 0 instead.In testimony to the Senate Subcommittee on Employment and Manpower, Mr. Heller predicted that a $10 billion cut in personal income taxes would boost consumption “by over $9 billion.” To assess the ultimate impact of the tax cut, Mr.

Heller applied the aggregate expenditures model. The basic rate of income tax is 20%, paid on income over the income tax threshold of £10, National insurance contributions. Another type of income tax is national insurance contributions, which are based on a similar principle of taking a certain percentage of income.

Consumption tax – VAT – %; Excise duties on alcohol, tobacco.