Whats the effect of an increase in consumption taxes on the formality of consumption stores?
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An increase in consumption taxes can affect the formality of consumption stores. Higher tax enforcement, which is often associated with an increase in consumption taxes, may lead to a shift of production and employment from the informal to the formal sectors of the economy . However, this shift may not necessarily lead to an increase in welfare. In fact, it may result in a decrease in welfare, especially in economies with large informal sectors . Additionally, the type of store in which purchases occur can be used as a proxy for informal consumption. It has been found that the budget share spent in the informal sector declines with income, making consumption taxes progressive and households in the richest quintile facing a higher effective tax rate than the poorest quintile . Therefore, an increase in consumption taxes may have implications for the formality of consumption stores, but its impact on welfare and inequality needs to be carefully considered.
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Open access•Posted Content | The provided paper does not discuss the effect of an increase in consumption taxes on the formality of consumption stores. |
Open access•Posted Content 1 Citations | The paper does not directly address the effect of an increase in consumption taxes on the formality of consumption stores. |
| The provided paper does not directly address the effect of an increase in consumption taxes on the formality of consumption stores. | |
10 Citations | The provided paper does not directly address the effect of an increase in consumption taxes on the formality of consumption stores. |
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