Tax Parameters in the Portuguese Economy: Part Ii - Direct Taxes

Abstract

In the second of two twin papers, we focus on direct taxes and formally discuss the correspondences between statutory and effective tax rates in the Portuguese economy. These correspondences depend on the details of the Portuguese tax law, on a wealth of data information, and on certain priors about the values of behavioral parameters in the economy. For each of the different tax margins, we choose a specification of the tax base that is standard in tax policy evaluation exercises, albeit necessarily only an approximation to the true tax base. In addition to the general correspondences, we present our own estimates of the effective tax rates at the different tax margins. More importantly, however, using the information in this paper, practitioners of tax policy evaluation can obtain their own estimates of the relevant tax parameters.

Keywords: Effective tax rates

JEL Classification: H20