Progressivity, equity and the take-up of state benefits, with application to the 1985 British tax and benefit system.

We investigate the allocation and the effects of personal taxes and state and social security benefits in modern economies. The most prominent contributions are as follows: (1) We propose a unified framework in which to discuss the progressivity, redistribution and equity of taxes and benefits. Through this, we offer a general class of indices of horizontal inequity that complements existing classes of progressivity and vertical equity indices. We highlight throughout the analytical and empirical contribution of individual taxes and benefits to the effect of the whole system, using the features of the 1985 British tax and benefit system. (2) We analyse state benefit take-up and welfare programme participation in the presence of divergences between the assessment of entitlement made by the take-up analyst and that carried out by the government's agency. This explicit modelling helps remove important biases in the computation of take-up and participation rates. It also detects the presence of allocative errors made by the government in alleviating poverty. Our methodology -- which may be usefully extended to other microeconometric applications -- simultaneously identifies the distribution of costs to participating in welfare programmes. (3) We provide econometric evidence on the level of claiming inconveniences inherent to the British Supplementary Benefit (now Income Support) programme and on how they dampen the welfare impact of state support. Besides, we can illustrate the degree of misallocation of state support among the poor and the non-poor. These allocative errors are also respectively aggravated and mitigated by the deterrence effect of claiming costs. We also examine the impact of allocative imperfections upon the level of progressivity, equity and redistribution exerted by redistributive tools. (4) We model the optimal design of state support in the presence of heterogeneity in original incomes and in the costs incurred in granting state support. We see that some simple rules which hold when income redistribution and poverty alleviation are costless do not hold anymore in more general cases. This also has important consequences for the consideration of principles of vertical and horizontal equity

Перераспределительные эффекты налогов и трансфертов: опыт Китая

Устойчивый и быстрый экономический рост Китая в течение последних десятилетий привел не только к повышению уровня доходов на душу населения, но также и к серьезному разрыву в доходах отдельных категорий граждан. Основными инструментами государственной политики перераспределения доходов являются налоги и трансферты. В статье анализируется их влияние на перераспределение доходов. Исследование проводилось с использованием метода декомпозиции на основе данных обследования городских домашних хозяйств Китая в 2002-2009 гг., представленных Национальным бюро статистики Китая. Эмпирические результаты исследования указывают на то, что чистые трансферты из бюджета сокращают неравенство доходов среди городского населения, и этот положительный эффект со временем возрастает. Подробное изучение данного вопроса показывает, что и налоги, и трансферты играют позитивную роль в корректировке неравномерного распределения доходов. Трансферты влияют в основном на сокращение горизонтального неравенства и вносят более значительный вклад в корректировку ситуации, чем налоги, которые главным образом способствуют сокращению вертикального неравенства. В целом, совместный перераспределительный эффект персонального подоходного налога и взносов на социальное страхование носит благоприятный характер и может использоваться для перераспределения доходов. Трансферты резидентам из государственного бюджета, страхование вкладов, социальная помощь и страхование от безработицы также уменьшают неравенство, однако эффект последних двух мер очень слабый. Резервный фонд, напротив, увеличивает разрыв в доходах. Выводы, сделанные по результатам исследования могут быть использованы при дальнейшем реформировании распределения доходов и продвижении налоговой реформы, а также в совершенствовании системы социального обеспечения.China’s sustained high-speed several-decade-long economic growth has raised the level of per capita income, but also brought about a serious income gap. Taxes and public transfers are main policy governmental tools in the process of redistribution. This paper leads a comprehensive analysis of the impacts of taxes and transfers on income redistribution using decomposition method and is based on China’s Urban Household Survey Data (2002-2009) derived from the National Bureau of Statistics of China. The empirical results reveal that government’s net transfer reduces urban household’s increasing market income inequality, and the improvement effect increases with time. Taking a closer look, it shows that both tax and transfer play positive adjusting roles. Transfer’s contribution is relatively larger, reflected mainly in the improvement of horizontal equality, while tax’s effect is mainly reflected in vertical equality. On the whole, the combined redistribution effect of personal income tax and social insurance expenses from residents to government is positive, and can play a role in regulating the income redistribution. Endowment insurance, social relief and unemployment insurance reduce inequality in the transfers of government to residents, even though the last two items’ effects are very weak. In contrast, provident fund expands income gap. The conclusions reached in this paper will refer to the refinement of income distribution reform, promotion of tax reform, and improvement of the social security system

National Taxation, Fiscal Federalism and Global Taxation

fiscal federalism, equalization, development finance

Economic consequences of tax simplification

Tax reform ; Taxation

How to measure tax burden in an internationally comparable way?

In this paper we address the issue of tax burden and its measurement, beginning with a discussion of use of tax-to-GDP ratio for this purpose. We show that this commonly used indicator has a number of flaws, related to the methodology of calculation of taxes and GDP in national accounts. Firstly, tax revenue calculated in accordance with ESA95 methodology is not perfectly in line with the economic concept of taxes, i.e. levies imposed by the government, which are compulsory and unrequited. Secondly, both tax revenue and GDP include a government component, which distorts the true picture of tax burden. Taxes paid on government expenditure have no impact on the deficit, do not affect incentives, do not constitute a ‘burden‘ on economic activity and may also distort cyclical adjustment of the budget. We propose a number of adjustments to deal with these problems and apply them to data for Hungary, Poland and Slovakia. The results indicate that in these countries, the underlying (methodologically and cyclically adjusted) tax burden imposed on economic activity has followed different trends from those implied by the headline tax-to-GDP ratios. The results show that it is also important to look at the headline and adjusted measures of the tax burden in disaggregated terms, namely dividing the tax burden into labour, corporate and indirect tax components.tax burden, cyclical adjustment

Redistributive Effect And Progressivity Of Taxes An International Comparison Across The EU Using EUROMOD

This paper gives an international comparison of the redistributive effect of personal income taxes in the 15 countries of the EU, using the European tax-benefit model EUROMOD. We focus on the effect of personal income taxes, social insurance contributions and other direct taxes. We present the contribution of progressivity and average tax rate to the reduction of income inequality, as well as the weight of the various types of tax concessions (i.e. exemptions, deductions, allowances and credits). There appears to be a wide variety among countries in the level of inequality reduction as well as in the instruments used to achieve this reduction. Personal income taxes are in all countries the most important source for inequality reduction, which is to a large extent, though not solely, due to the progressive rate schedule. Countries with a high degree of pre-tax inequality do not systematically redistribute more through their taxes; the results indicate rather the opposite.European Union, microsimulation, income redistribution, income taxes, social insurance contributions

Income Redistribution in Croatia: The Role of Individual Taxes and Social Transfers

The paper discusses the methodology and preliminary results of an investigation of the redistributive effects of social security contributions (SSC), personal income tax (PIT), public pensions as well as means-tested and non-means-tested cash benefits in Croatia. The transition from a pre- to a post-tax-and-benefit income is analyzed in order to reveal which instruments contribute most to the reduction of inequality. The Croatian system of individual taxes, pensions and social benefits seems to be highly redistributive, with public pensions being the instrument that contributes most, followed by SSC and PIT.income inequality, redistribution, fiscal instruments