The Responsiveness of Taxable Income to Changes in Marginal Tax Rates in Barbados

Winston Moore

MPRA Paper from University Library of Munich, Germany

Abstract: Since 2003 policymakers in Barbados have implemented a series of tax reforms that have lowered both basic as well as marginal income tax rates. These changes have more than likely induced taxpayers to alter their behaviour in order to affect their reported taxable income. This paper employs an annual sample of 3,000 individual taxpayers between 2003 and 2006 to investigate the sensitivity of taxable income to changes in marginal tax rates. The empirical approach adopted also allows the researcher to provided evidence on the variation in taxable income by gender and income group. The paper finds that for every 1 percent rise in the marginal tax rate, taxable income decreases by 0.2 percent. Further disaggregation of the database also revealed that a strong negative labour supply effect causes the elasticity for low-income taxpayers to rise to 0.9, while females tend to be more responsive to changes in marginal taxes relative to males.

Keywords: Taxable income; Marginal tax rates; Tax avoidance (search for similar items in EconPapers)
JEL-codes: C23 H2 H31 (search for similar items in EconPapers)
Date: 2008-06-15
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/21583/1/MPRA_paper_21583.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21583

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().