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The distributional effects of value added tax in Ireland
journal contribution
posted on 2023-06-08, 11:04 authored by Eimear Leahy, Seán Lyons, Richard TolRichard TolIn this paper we examine the distributional effects of Value Added Tax (VAT) in Ireland. Using the 2004/2005 Household Budget Survey, we assess the amount of VAT that households pay as a proportion of weekly disposable income. We measure VAT payments by equivalised income decile, households of different composition and different household sizes. The current system is highly regressive. With the use of a micro-simulation model we also estimate the impact of changing the VAT rate on certain groups of items and the associated change in revenue. We also consider how the imposition of a flat rate across all goods and services would affect households in different categories. The Irish Government has recently announced that it proposes to increase the standard rate of VAT to 22 per cent in 2013 and to 23 per cent in 2014. We examine the distributional implications of such increases. The general pattern of results shows that those hardest hit are households in the first income decile, households in rural areas, 6 person households and households containing a single adult with children.
History
Publication status
- Published
Journal
Economic and Social ReviewISSN
0012-9984Publisher
Economic & Social StudiesIssue
2Volume
42Page range
213-235Department affiliated with
- Economics Publications
Full text available
- No
Peer reviewed?
- Yes