The Economics of Taxation ppt

[...]... firms; the profits of other firms are taxed as part of the personal income of their owners The computation of the corporate income tax liability of a firm follows a number of rules that concern the treatment of capital gains, depreciation, provisions, and past losses among other things As a consequence the effective revenue of the tax may be higher in a country where its nominal rate is lower The double taxation. .. in the United Kingdom) On the other hand, the share of excises (specific taxes that are levied on the consumption of a given good, e.g., alcohol, tobacco, and gasoline) has strongly declined over the last thirty years While these taxes were the main resource of governments until the nineteenth century, they now constitute only 12 percent of the tax revenue in the OECD The other two tax resources (the. .. Economics MIT Press ´ Salanie, B 2000 The Microeconomics of Market Failures MIT Press Steinmo, S 1993 Taxation and Democracy Yale University Press This page intentionally left blank I The Effects of Taxation The first part of this book is dedicated to the study of the economic effects of taxation Assume, for instance, that government decides to raise the VAT on sales of cars The political effects of. .. transition from one equilibrium to the other 16 Part I The Effects of Taxation The theory of tax incidence aims at characterizing the effect on economic equilibrium of a change in taxes The changes in prices are a target variable of the theory; ideally (if it were easy to evaluate changes in utilities) the theory should also compare the utilities of all agents before and after the tax change, so as to give... payroll taxes on the low-skilled 1.1.2 The General Analysis of Partial Equilibrium The Competitive Case The analysis of the incidence of the tax on a good (e.g., VAT on cars) is formally identical to that of the impact of payroll taxes on the labor market: identify the net wage to the producer price, the gross wage to the consumer price, and let the demand and supply curves now be drawn for the good under... hardly moves the consumer price: the producers bear the whole burden of the tax 20 Part I The Effects of Taxation in the polar case where supply is much more elastic than demand (eS g eD ), VAT is entirely shifted to the consumer, who bears the whole tax burden This is called forward tax shifting.17 The rule to remember is that the more inelastic side of the market bears the greater part of the tax burden... consideration It follows that the creation (or the increase) of a VAT on cars increases the consumer price all the more that the demand for cars is less elastic than the supply of cars reduces the producer price all the more that the supply of cars is less elastic than the demand for cars reduces the number of cars sold in equilibrium all the more that demand and supply are more elastic There are two interesting... how these questions can be studied in the light of the results obtained in the first two parts, we examine in a third and last part three current tax policy debates: low-income support, the consumption tax, and environmental taxation A warning is in order here The positive study of taxation does not reduce to the elements given in the first part of this book One may want to go beyond the study of the. .. complain that their sales will decrease, and car buyers will fear a rise in the price of cars But who does really bear the price of such a rise in VAT, and in what proportions? Chapter 1 studies this question, first in a partial equilibrium, then in a general equilibrium framework Another often debated question is that of the disincentive effects of taxation, as in the negative effect of the income tax... to an explosion of social expenditure that can be seen in the strong increase of the share of transfers in public expenditure in all of these countries over the last hundred years The value-added tax (VAT) was introduced in France in the 1950s It has now become a central tool of tax policy in most developed countries, with the exception of the United States It was institutionalized in the European Union . class="bi x0 y0 w0 h1" alt="" The Economics of Taxation This page intentionally left blank The Economics of Taxation Bernard Salanie ´ The MIT Press Cambridge,. resource of governments until the nine- teenth century, they now constitute only 12 percent of the tax reve- nue in the OECD. The other two tax resources (the