TY - JOUR
AU1 - RICHARDS, GORDON
AB - This article examines the macroeconomic impact of a consumptionbased valueadded tax VAT using simulations of a largescale model. The VAT is imposed as a structural reform of the tax code rather than as a revenueraising device, i.e., the revenues from the VAT are offset by compensatory reductions elsewhere. Three basic scenarios are examined, in which 1 the VAT is offset by individual rate reductions, 2 abolition of the corporate profits tax in conjunction with a small individual rate cut, and 3 an investment tax credit with the balance of the revenues offset by a personal rate cut. Additionally, this paper examines the effects of the microeconomic incidence of the VAT, i.e., whether it is fully passed through to output prices or shifted back onto profits. The finding is that the VAT in general raises the longterm level of output, but at the cost of initial output losses, which are in evidence even when the associated rise in the price level is accommodated by a corresponding shift in monetary policy. In addition to changes in the intertemporal distribution of growth, there are significant changes in the composition of GNP, which shifts away from consumption, toward business fixed investment and net exports. These changes are particularly pronounced when the VAT is fully passed through. When the tax is partially shifted back, the gains in investment and trade are less marked, while business profits are reduced, and the longterm increase in output is smaller.
TI - SOME MACROECONOMIC IMPLICATIONS OF THE VALUEADDED TAX RESULTS FROM AN ECONOMETRIC MODEL
JF - Studies in Economics and Finance
DO - 10.1108/eb028684
DA - 1989-02-01
UR - https://www.deepdyve.com/lp/emerald-publishing/some-macroeconomic-implications-of-the-valueadded-tax-results-from-an-DfUG7H0OLT
SP - 43
EP - 83
VL - 12
IS - 2
DP - DeepDyve
ER -