Progressiveness of the VAT and Excises in the Czech Republic - Empirical Analysis

Abstract:     
Common belief is that consumption taxes are regressive. That is true if annual income is considered as a potential to consume or as a measure of taxpayer’s well-being. However, there are both theoretical and empirical evidence that e.g. the VAT could be proportional or even progressive if the lifetime income is used as a measure of well-being. In this paper the both approaches to the tax incidence (lifetime incidence approach and annual income incidence approach) are discussed and comparison of their results is provided.

The paper proceeds as follows: At the beginning we compare the meaning of progressiveness under the lifetime incidence framework with the annual income framework. The construction of the lifetime income measure is described. A micro-simulation model which was developed to estimate household’s tax burden as well as data employed are described in the next section. Then the results of progressiveness analysis are presented.

Number of Pages in PDF File: 14

Keywords: progressiveness, VAT, excises, lifetime incidence, micro-simulation model

JEL Classification: H22

Accepted Paper Series