The Distributional Effects of Taxes and Transfers Under Alternative Income Concepts

Francesco Figari () and Alari Paulus

Public Finance Review, 2015, vol. 43, issue 3, 347-372

Abstract: This article investigates how the distribution of income changes when the standard disposable income (DI) is replaced by an extended income (EI) concept that includes the three “I†s: indirect taxes , imputed rent , and in-kind benefits . Second, it assesses the distributional effects of the main types of tax-benefit instruments under different income concepts. The analysis covers three European countries (Belgium, Greece, and the United Kingdom) characterized by substantially different tax-benefit systems. The overall redistributive effect of the tax-benefit systems depends heavily on the income concept considered and the differences across countries are smaller when considering the EI. Moreover, the common use of a narrower income concept, such as the DI, can lead to the overestimation of the redistributive effect of the cash tax-benefit instruments (in relative terms), the extent of this varying across countries, due to the size and distribution of three “I†s and the adoption of the needs-adjusted equivalence scale.

Keywords: imputed rent; indirect taxes; in-kind benefits; household income; EUROMOD (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: GINI DP 28: The impact of indirect taxes and imputed rent on inequality: A comparison with cash transfers and direct taxes in five EU countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:43:y:2015:i:3:p:347-372

DOI: 10.1177/1091142113506930

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