Optimal Tax Structure for Consumption and Income Inequality:an Empirical Assessment

Antonio Afonso and José Alves

No 2018/51, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: In the present empirical analysis, we try to assess the impact of taxation on investment, growth. In particular, and by using gross fixed capital formation as a proxy for investment, we intend to evaluate the impact of the taxation structure in investment dynamics, in a short and a long-run perspectives. This empirical exercise was conducted for all OECD countries, during the 1980-2015 period. Through panel data econometric techniques, we find optimal tax-investment threshold values, especially higher for short-term than for long-term horizon. In addition, we find optimal income taxation around 9%, in percentage of GDP, an average optimal value of 12.7% for consumption taxes to promote annual investment growth.

Keywords: Investment Growth; Tax systems; Fiscal Policy; Optimal taxation (search for similar items in EconPapers)
JEL-codes: D25 E62 H21 O47 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp0512018

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