Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria's 2008 flat tax reform

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper provides a quantitative evaluation of the welfare effect of the introduction of proportional taxation in Bulgaria in 2008, an effect that operates through the grey economy channel. Using a general-equilibrium model, augmented with informal sector, a computational experiment is performed to evaluate the welfare gain from the adoption of proportional taxation. The lower effective tax burden in the new tax regime produces a relocation of people into the official sector, stimulates investment, and increases output and consumption. Finally, under the flat tax regime, the size of the informal sector is smaller, and quantitatively consistent with OECD (2009) and European Commission (2012) figures.

Keywords: taxation; informal sector (search for similar items in EconPapers)
JEL-codes: D91 J46 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cmp, nep-cse, nep-dge and nep-iue
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Citations: View citations in EconPapers (33)

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Related works:
Journal Article: Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria’s 2008 flat tax reform (2015)
Journal Article: Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria's 2008 flat tax reform (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:144528

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