Effects of past and new VAT reforms in Finland

Jouko Kinnunen, Timo Rauhanen and Juha Honkatukia

No 3412, EcoMod2011 from EcoMod

Abstract: We study the effects of recent VAT reforms in Finland. Our counterfactual scenarios try to find, whether other reforms would enhance economic efficiency without compromising equity. We use a recursive dynamic applied GE model (VATTAGE, coded in GEMPACK) to study the macro, industrial and distributional effects of VAT reforms. We discuss different ways of modeling labor market issues We show that counterfactual reforms abolishing different VAT reforms in favor of one, general VAT rate fares better than the current differential VAT rate system. However, we show that it is not always the case that decreasing income taxation boosts growth when VAT rate is rased simultaneously in a revenue-neutral manner.

Keywords: Finland; Tax policy; Public finance and tax issues (search for similar items in EconPapers)
Date: 2011-07-06
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:002625:3412

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