Economic Effects of Vat Reform in Germany

36 Pages Posted: 22 May 2006 Last revised: 26 Aug 2008

See all articles by Stefan Boeters

Stefan Boeters

CPB Netherlands Bureau of Economic Policy Analysis; ZEW – Leibniz Centre for European Economic Research

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Thiess Buettner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg; CESifo (Center for Economic Studies and Ifo Institute)

Margit Kraus

ZEW – Leibniz Centre for European Economic Research

Date Written: 2006

Abstract

In the tax policy debate, differentiation of value-added taxes is often justified by distributional concerns. Our quantitative analysis for Germany indicates that such concerns are misplaced. We find that the abolition of VAT differentiation has only negligible redistributive effects. Instead, reduced VAT are found to act as industry-specific subsidies. Whereas the overall welfare effects of pure VAT reforms are very small, a revenue-neutral introduction of a harmonised VAT combined with reductions in the marginal income tax rates or social security contributions turns out to produce substantial welfare gains for all households.

Keywords: VAT, tax reforms, distribution, efficiency, applied general equilibrium

JEL Classification: D58, H22, H24

Suggested Citation

Boeters, Stefan and Bohringer, Christoph and Buettner, Thiess and Kraus, Margit, Economic Effects of Vat Reform in Germany (2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-030, Available at SSRN: https://ssrn.com/abstract=903726 or http://dx.doi.org/10.2139/ssrn.903726

Stefan Boeters (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

HOME PAGE: http://www.cpb.nl/eng/general/org/homepages/sbt/

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Christoph Bohringer

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Thiess Buettner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Lange Gasse 20
Nürnberg, Bavaria 90403
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Margit Kraus

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+49 621 1235 163 (Phone)
+49 621 1235 215 (Fax)

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