Showing papers on "Consumption tax published in 1986"

A New Method for Estimating the Effects of Fuel Taxes: An Application to Thailand

Abstract: This article proposes a new methodology for estimating the impact of fuel price and tax changes on the general price level and the distribution of income and applies a model to Thailand using data for 1975-76 and 1981-82. Because the model allows for pricing under international competition where tax increases must be partially absorbed in reduced factor income rather than always being passed on in higher consumer prices, the results are significantly different from those generated by the more conventional cost-plus pricing rule. The inflationary impact of fuel tax changes is slight because of both the openness of the economy and the low energy intensity of manufacturing and other production in Thailand. In contrast, taxes on imports engender price increases not only for imports but also for goods which substitute for imports. The model also indicates that the net effects of taxes on petroleum products (other than kerosene) are progressive in their distributional impact, relative to a tax on imports or consumption. A main policy conclusion of the study is that fuel taxes could be used to increase both equity and allocative efficiency without inducing significant inflationary responses. It follows that in the current circumstances of falling world oil prices, developing countries could generate revenues needed for structural adjustment by increasing fuel taxes to maintain domestic petroleum price levels.

Interjurisdictional coordination of sales taxes

Abstract: The paper surveys and evaluates the principles, criteria and practices that govern the interjurisdictional coordination of sales taxes. The analysis is illustrated by references to countries that are members of the OECD. The key issues examined are the equivalence theorem, border tax adjustments, tax treatment of mail order businesses and the distortions created by taxes. The paper concludes with some recommendations on what form interjurisdictional coordination of sales tax should take.

Criteria for choice among types of value-added tax

Abstract: The paper analyses different rules of taxation of value added, and draws up compatible combinations for the various features. The paper concludes that almost universally the type of VAT chosen is that which embodies the following characteristics: consumption type, destination principle, tax-credit method and multiple rates that are tax exclusive.

Implementing tax reform: the intergenerational carryover problem

Abstract: The implementation of tax reform may cause a "carryover problem" when previously taxed income is taxed again under the new tax regime; for example, the imposition of a cash flow consumption tax wou...

Worldwide experience in sales taxation: Lessons for North America

Abstract: Worldwide fiscal experience over the past twenty-five years indicates steady expansion in the political and academic constituency for expenditure taxation, including indirect taxes on consumption. Retail levies have emerged as the preferred method of indirect taxation of consumption, as older, pre-retail sales taxes have proven unsuited to modern economic structures. Increasingly, reform of sales taxation has involved a shift to one particular form of tax, the European Community type of value-added tax (VAT). This consumption tax option is again a topic of policy debate in North America, particularly in Canada where a VAT was under active consideration in 1985. This paper sifts through worldwide experience with broad-based sales taxes to identify lessons for tax policy in North America both in the short and longer-run. It indicates that the reputation of such taxes as regressive instruments may have been much exaggerated, and that in any case methods are available, particularly in Canada, for resolving equity issues in sales taxation. The VAT is shown to have marginal economic and administrative advantages over single-stage federal retail taxes in both Canada and the US. However, these advantages are not nearly so significant as in European countries where the VAT was adopted there. Further, sensible debate over the merits and limitations of the VAT in North America will call for much closer scrutiny of the problems unique to this form of tax. Finally, three political issues that were not significant in Europe will likely have an important bearing on any future choices of sales tax instruments, both in the U.S. and in Canada.

On the Optimality of a Consumption Tax

Abstract: Feldstein (1978) employed a simple life-cycle model to argue that a consumption tax would substantially reduce the excess burden of the current system of labor and capital income taxation. This note provides a general characterization of the optimal tax structure for this model. Maintaining Feldstein's other assumptions about parameter values, it is optimal to tax or subsidize capital income according to whether labor supply is an increasing or decreasing function of the wage rate.