Changes in the Tax Mix from Income Taxation to GST: Revenue and Redistribution

John Creedy and Angela Mellish

No 1102, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper examines the conditions under which a partial shift from a multi-step personal income tax structure towards a general consumption tax can be both revenueneutraland distribution-neutral, in a cross-sectional context. In the absence of a taxfree- threshold, this can be achieved with a broad-based consumption tax, or one in which, at each income level, the proportion of taxed expenditure is independent of total expenditure. Such a change, involving a smaller percentage reduction in the higher marginal tax rates, is also shown to increase labour supply in a simple continuous-hours model.

Pages: 16 pages
Date: 2010
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Related works:
Journal Article: Changes in the tax mix from income taxation to GST: Revenue and redistribution (2011)
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