Annual and lifetime incidence of the value-added tax in France

Impact distributif de la TVA sur le cycle de vie

Simon Georges-Kot
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Simon Georges-Kot: INSEE - Institut national de la statistique et des études économiques (INSEE)

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Abstract: Consumption taxes represent on average 30% of the total tax revenu and 10% of the GDP in OECD countries. In France, the value-added tax (VAT) makes up most of consumption taxes and constitutes 50% of the state's fiscal resources, yet progress still needs to be made to fully understand its distributional impact. In particular, since savings partly serve to finance future consumption, the incidence of consumption taxes should be measured over the entire life-cycle of individuals. This has proven difficult to do because appropriate data does not exist. Consumption surveys necessary to impute taxes paid by households are cumbersome and consequently bear no panel dimension. However, repeated cross-sections for such surveys are almost always available. In this paper, I take advantage of this feature to estimate a simple parametric model for the joint dynamics of income and VAT over the life of individuals. I then use simulation methods to recover the joint distribution of permanent income and VAT. According to the estimates, permanent VAT is half less regressive than annual VAT.

Keywords: consumption dynamics; income dynamics; value-added tax; life cycle; Dynamique de la consommation; dynamique des revenus; taxe sur la valeur ajoutée; cycle de vie (search for similar items in EconPapers)
Date: 2015-09
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