Moving to a consumption-based tax system: a quantitative assessment for Brazil
Autor(a) principal: | |
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Data de Publicação: | 2010 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Revista Brasileira de Economia (Online) |
Texto Completo: | http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402010000200008 |
Resumo: | For many years, it has been a primary issue in tax policy whether the tax system ought to be built around income tax or consumption tax. Much of the interest in tax policy arises from the widespread belief that taxes on income and savings tend to lower long-run income by retarding the creation and expansion of firms and by discouraging workers and investments. Following this belief, Brazilian government has proposed a tax reform which, basically, replaces tax on investment and labor with tax on consumption. In this paper, we develop a dynamic general equilibrium model with heterogeneous agents to guide our quantitative assessment of the economic and distributional implications of such tax reform. The model is calibrated in such a way that it matches some selected features of the Brazilian economy. We also use the calibrated model to calculate the deadweight loss of each type of taxation and thus provide some rationality for that rearrangement in the tax system. The main result of the paper is that, even though the tax reform increases the asset accumulation, labor and output of economy, it also raises the welfare inequality as borrowing constrained individuals cannot take advantage of the drop in tax on savings. |
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Moving to a consumption-based tax system: a quantitative assessment for BrazilTax ReformWelfare DistributionDeadweight LossBrazilFor many years, it has been a primary issue in tax policy whether the tax system ought to be built around income tax or consumption tax. Much of the interest in tax policy arises from the widespread belief that taxes on income and savings tend to lower long-run income by retarding the creation and expansion of firms and by discouraging workers and investments. Following this belief, Brazilian government has proposed a tax reform which, basically, replaces tax on investment and labor with tax on consumption. In this paper, we develop a dynamic general equilibrium model with heterogeneous agents to guide our quantitative assessment of the economic and distributional implications of such tax reform. The model is calibrated in such a way that it matches some selected features of the Brazilian economy. We also use the calibrated model to calculate the deadweight loss of each type of taxation and thus provide some rationality for that rearrangement in the tax system. The main result of the paper is that, even though the tax reform increases the asset accumulation, labor and output of economy, it also raises the welfare inequality as borrowing constrained individuals cannot take advantage of the drop in tax on savings.Fundação Getúlio Vargas2010-06-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402010000200008Revista Brasileira de Economia v.64 n.2 2010reponame:Revista Brasileira de Economia (Online)instname:Fundação Getulio Vargas (FGV)instacron:FGV10.1590/S0034-71402010000200008info:eu-repo/semantics/openAccessSantos,Marcelo Rodrigues dosPereira,Thiago Neveseng2010-08-10T00:00:00Zoai:scielo:S0034-71402010000200008Revistahttp://bibliotecadigital.fgv.br/ojs/index.php/rbe/issue/archivehttps://old.scielo.br/oai/scielo-oai.php||rbe@fgv.br1806-91340034-7140opendoar:2010-08-10T00:00Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV)false |
dc.title.none.fl_str_mv |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
title |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
spellingShingle |
Moving to a consumption-based tax system: a quantitative assessment for Brazil Santos,Marcelo Rodrigues dos Tax Reform Welfare Distribution Deadweight Loss Brazil |
title_short |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
title_full |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
title_fullStr |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
title_full_unstemmed |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
title_sort |
Moving to a consumption-based tax system: a quantitative assessment for Brazil |
author |
Santos,Marcelo Rodrigues dos |
author_facet |
Santos,Marcelo Rodrigues dos Pereira,Thiago Neves |
author_role |
author |
author2 |
Pereira,Thiago Neves |
author2_role |
author |
dc.contributor.author.fl_str_mv |
Santos,Marcelo Rodrigues dos Pereira,Thiago Neves |
dc.subject.por.fl_str_mv |
Tax Reform Welfare Distribution Deadweight Loss Brazil |
topic |
Tax Reform Welfare Distribution Deadweight Loss Brazil |
description |
For many years, it has been a primary issue in tax policy whether the tax system ought to be built around income tax or consumption tax. Much of the interest in tax policy arises from the widespread belief that taxes on income and savings tend to lower long-run income by retarding the creation and expansion of firms and by discouraging workers and investments. Following this belief, Brazilian government has proposed a tax reform which, basically, replaces tax on investment and labor with tax on consumption. In this paper, we develop a dynamic general equilibrium model with heterogeneous agents to guide our quantitative assessment of the economic and distributional implications of such tax reform. The model is calibrated in such a way that it matches some selected features of the Brazilian economy. We also use the calibrated model to calculate the deadweight loss of each type of taxation and thus provide some rationality for that rearrangement in the tax system. The main result of the paper is that, even though the tax reform increases the asset accumulation, labor and output of economy, it also raises the welfare inequality as borrowing constrained individuals cannot take advantage of the drop in tax on savings. |
publishDate |
2010 |
dc.date.none.fl_str_mv |
2010-06-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402010000200008 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-71402010000200008 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
10.1590/S0034-71402010000200008 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
text/html |
dc.publisher.none.fl_str_mv |
Fundação Getúlio Vargas |
publisher.none.fl_str_mv |
Fundação Getúlio Vargas |
dc.source.none.fl_str_mv |
Revista Brasileira de Economia v.64 n.2 2010 reponame:Revista Brasileira de Economia (Online) instname:Fundação Getulio Vargas (FGV) instacron:FGV |
instname_str |
Fundação Getulio Vargas (FGV) |
instacron_str |
FGV |
institution |
FGV |
reponame_str |
Revista Brasileira de Economia (Online) |
collection |
Revista Brasileira de Economia (Online) |
repository.name.fl_str_mv |
Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV) |
repository.mail.fl_str_mv |
||rbe@fgv.br |
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1754115905193771008 |