Flat-Rate versus Progressive Taxation? An Impact Evaluation Study for the Case of Romania

Madalina Popescu, Eva Militaru, Larisa Stanila, Maria Denisa Vasilescu and Amalia Cristescu
Additional contact information
Eva Militaru: National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
Larisa Stanila: National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
Maria Denisa Vasilescu: National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania
Amalia Cristescu: National Scientific Research Institute for Labor and Social Protection, 010643 Bucharest, Romania

Sustainability, 2019, vol. 11, issue 22, 1-16

Abstract: Taking into consideration the recent debates on adopting a progressive tax system over the flat-rate taxation, our paper aims to investigate the impact of a change in the current Romanian personal income tax policy system from the 10% flat-rate tax system to some alternative progressive taxation scenarios. The methodological approach consisted in using the European Union Survey on Income and Living Conditions (EU-SILC) database to micro-simulate the impact upon poverty and income inequality. Through our ex-ante tax policy analysis we bring empirical evidence of a modest, but positive effect upon poverty rate and income inequalities in favor of a progressive taxation system. However, when looking at the government financial implications through the personal income tax budget revenues, we discuss upon the possible trade-off between the benefits on poverty and income inequalities and the possible budgetary drawbacks. Despite the data limitations, this study has the benefit of being among the first attempts to evaluate the impact of a personal income tax policy reform for the case of Romania.

Keywords: flat-rate taxation; progressive taxation; income inequality; poverty rate; budget revenues; policy impact evaluation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.mdpi.com/2071-1050/11/22/6405/pdf (application/pdf)
https://www.mdpi.com/2071-1050/11/22/6405/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:22:p:6405-:d:286914

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().