Distributional effects and progressivity of Portugal-s Taxes a new annual-level tool

• Autor(a) principal: Santos, Francisco Miguel Marques Nunes
• Data de Publicação: 2021
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/143069
• topic: Portugal; Public finance; Tax progressivity; Income taxes; Vat; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

We combine microdata from the Household Budget Survey(HBS)and the Survey on Income and Living Conditions to estimate the progressivity of the Withheld Personal Income Tax, Social Security Contributions and of the Value-Added Tax, on an annual basis between 2014 and 2019. The development of an imputation method to annualize expenditure estimates allow for the evaluation of taxes’ progressivity for several consecutive years, which constitutes anew and important contributions relative to previous literature. The Reynolds-Smolensky and the Kakwani indices are used to evaluate the progressivity of the tax system. In line with previous applications for Portugal, we conclude that the Withheld Personal Income Tax is the most progressive component of the Portuguese Tax System, whilst VAT was estimated to be regressive. The evaluation of annual changes–instead of 5-year estimates -in progressivity enables the measurement of the impact of specific fiscal changes and to better inform future policy discussions. We illustrate this by estimating the impact on progressivity of the gradual elimination of the Personal Income Tax Surcharge and of the decrease in Restaurants’ VAT.