PROGRESSIVE REFORM OF VALUE ADDED TAX: AN INVESTIGATION ON POVERTY AND INEQUALITY IN ECUADOR REFORMA IMPOSITIVA PROGRESIVA AL IVA: ANALIZANDO LA POBREZA Y DESIGUALDAD EN EL ECUADOR

Marcelo Varela, Jose Antonio Sanchez and Nicole Cerda Monge

Revista Internacional Administracion & Finanzas, 2019, vol. 12, issue 1, 79-98

Abstract: The purpose of this study is to evaluate the effects of a progressive reform of the Value Added Tax (VAT) as a mechanism for redistributing income and expenses in Ecuador. We also determine which products should reduce the percentage, which products should increase. We do this in accordance with a progressiveness of 8%, 14% and 18%. The current Value Added Tax equals 0% and 12% at present. Our analysis makes use of ECUAMOD, the microsimulation model of fiscal benefits for Ecuador, together with household microdata representative of the household survey called ENIGHUR 2011-2012. These scenarios have been constructed considering the VAT on these products is higher in other countries. Our simulations show that three scenarios increase fiscal revenues. They can be used for an increase in Monetary Transfers, as well as allowing reducing the fiscal deficit. This can be done without affecting inequality

Keywords: Value Added Tax; Poverty; Inequality; Income Distribution; Microsimulation (search for similar items in EconPapers)
JEL-codes: D13 H24 I32 I38 (search for similar items in EconPapers)
Date: 2019
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