Measuring the impacts of personal and corporate income tax cuts on a small island open economy
Autor(a) principal: | |
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Data de Publicação: | 2009 |
Outros Autores: | , , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.3/4837 |
Resumo: | In 1999, subsequent to a legislative review, the authorities of the Azores, an autonomous region of Portugal, decided to reduce income tax rates applicable locally by 30% in the case of corporate income and by 20% in the case of personal income. There was no debt or transfer compensation for this tax reduction, meaning that the regional budget was reduced by the equivalent amount of the tax reduction. The current paper analyses the impact of such a shock on various macro and micro variables pertaining to the Azorean economy, including social welfare, using a dynamic CGE model comprising forty five sectors, six household groups, three government levels and four trading partners. It is concluded that the short run impact on GDP is, as expected, negative, given that the marginal propensity to save of the private sector is positive and there was no compensating policy. There is an initial increase in unemployment due to the cut in government expenditures. In the long run, however, the impact becomes positive due to increased investment and private consumption. The stronger effect comes from the reduction in personal income taxes, a much greater proportion of all taxes collected in the region. Real wages net of personal income taxes rise as does the labour supply. The impact of the policy is shown to be positive for all household income groups, as evaluated through equivalent variation. The lowest income group ends up benefiting the most, in relative terms. |
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Measuring the impacts of personal and corporate income tax cuts on a small island open economyEconomia SocialRendimento LocalTaxa de ImpostoLocal IncomeSocial EconomyTax RateAzoresIn 1999, subsequent to a legislative review, the authorities of the Azores, an autonomous region of Portugal, decided to reduce income tax rates applicable locally by 30% in the case of corporate income and by 20% in the case of personal income. There was no debt or transfer compensation for this tax reduction, meaning that the regional budget was reduced by the equivalent amount of the tax reduction. The current paper analyses the impact of such a shock on various macro and micro variables pertaining to the Azorean economy, including social welfare, using a dynamic CGE model comprising forty five sectors, six household groups, three government levels and four trading partners. It is concluded that the short run impact on GDP is, as expected, negative, given that the marginal propensity to save of the private sector is positive and there was no compensating policy. There is an initial increase in unemployment due to the cut in government expenditures. In the long run, however, the impact becomes positive due to increased investment and private consumption. The stronger effect comes from the reduction in personal income taxes, a much greater proportion of all taxes collected in the region. Real wages net of personal income taxes rise as does the labour supply. The impact of the policy is shown to be positive for all household income groups, as evaluated through equivalent variation. The lowest income group ends up benefiting the most, in relative terms.Universidade dos AçoresRepositório da Universidade dos AçoresBayar, AliFortuna, MárioMohora, CristinaOpese, MasudiSisik, Suat2018-10-09T12:09:10Z2009-032009-03-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.3/4837engBayar, Ali; Fortuna, Mário; Mohora, Cristina; Opese, Masudi; Sisik, Suat (2009). Measuring the impacts of personal and corporate income tax cuts on a small island open economy, “Working Paper Series”, 4, 58 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2022-12-20T14:33:04Zoai:repositorio.uac.pt:10400.3/4837Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T16:27:10.515120Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
title |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
spellingShingle |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy Bayar, Ali Economia Social Rendimento Local Taxa de Imposto Local Income Social Economy Tax Rate Azores |
title_short |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
title_full |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
title_fullStr |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
title_full_unstemmed |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
title_sort |
Measuring the impacts of personal and corporate income tax cuts on a small island open economy |
author |
Bayar, Ali |
author_facet |
Bayar, Ali Fortuna, Mário Mohora, Cristina Opese, Masudi Sisik, Suat |
author_role |
author |
author2 |
Fortuna, Mário Mohora, Cristina Opese, Masudi Sisik, Suat |
author2_role |
author author author author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade dos Açores |
dc.contributor.author.fl_str_mv |
Bayar, Ali Fortuna, Mário Mohora, Cristina Opese, Masudi Sisik, Suat |
dc.subject.por.fl_str_mv |
Economia Social Rendimento Local Taxa de Imposto Local Income Social Economy Tax Rate Azores |
topic |
Economia Social Rendimento Local Taxa de Imposto Local Income Social Economy Tax Rate Azores |
description |
In 1999, subsequent to a legislative review, the authorities of the Azores, an autonomous region of Portugal, decided to reduce income tax rates applicable locally by 30% in the case of corporate income and by 20% in the case of personal income. There was no debt or transfer compensation for this tax reduction, meaning that the regional budget was reduced by the equivalent amount of the tax reduction. The current paper analyses the impact of such a shock on various macro and micro variables pertaining to the Azorean economy, including social welfare, using a dynamic CGE model comprising forty five sectors, six household groups, three government levels and four trading partners. It is concluded that the short run impact on GDP is, as expected, negative, given that the marginal propensity to save of the private sector is positive and there was no compensating policy. There is an initial increase in unemployment due to the cut in government expenditures. In the long run, however, the impact becomes positive due to increased investment and private consumption. The stronger effect comes from the reduction in personal income taxes, a much greater proportion of all taxes collected in the region. Real wages net of personal income taxes rise as does the labour supply. The impact of the policy is shown to be positive for all household income groups, as evaluated through equivalent variation. The lowest income group ends up benefiting the most, in relative terms. |
publishDate |
2009 |
dc.date.none.fl_str_mv |
2009-03 2009-03-01T00:00:00Z 2018-10-09T12:09:10Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.3/4837 |
url |
http://hdl.handle.net/10400.3/4837 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Bayar, Ali; Fortuna, Mário; Mohora, Cristina; Opese, Masudi; Sisik, Suat (2009). Measuring the impacts of personal and corporate income tax cuts on a small island open economy, “Working Paper Series”, 4, 58 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A. |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Universidade dos Açores |
publisher.none.fl_str_mv |
Universidade dos Açores |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799130726500663296 |