The Revenue and Welfare Effects of Fiscal Harmonization for the Uk

Abstract

This paper describes the distributional, efficiency and revenue consequences of changes to the structure of indirect taxation in the UK implied by proposals for tax harmonization across the EEC. The results were generated by a microcomputer simulation program that allows the user to change the structure of indirect taxes in any desired way. The program features estimates of a system of demand equations obtained using 100,000 observations from the Family Expenditure Surveys to predict behavioural reactions to tax changes and their consequences for revenue and welfare.

The Welfare Economics of Tax Co-ordination in the European Community: A Survey

“…The extent to which it is appropriate to pursue these policies through indirect taxation is a matter of broader controversy, but certainly rates in the Community currently seem heavily influenced by such concerns. Hence so too have been responses to the Commission's proposals: Symons and Walker (1989), for example, find that they would have led to a small increase in inequality.…”

Excise Duties and the Internal Market

“…In some states they will have a dramatic effect on the consumption of dutiable goods. A rise in alcohol consumption of between 20 and 50 per cent has been predicted for the UK (see Lee, Pearson andSmith, 1988, Symons andWalker, 1988), and the consequences will be no less significant in those Member States that, for the first time, will be required to impose excises on wines, or large increases in tobacco duty. Consumption changes of this magnitude affect powerful industrial interests, will lead to profound changes in social habits, and have important implications for health policy.…”

Tax harmonization in the European Community: Policy Issues and Analysis

“…Ta bles L 1-15 present estimates, from national studies, of the effects of the Commission's 1987 pro posals. 66 Table 1 1 contains estimates by Symons and Walker (1989) on the structure of household consumption in the United Kingdom. Lower excise rates on alcoholic beverages would boost alcohol consumption significantly, whereas higher excise rates on mineral oils wouJd reduce household de � and for fuel by about 12 percent.…”

“…Relative changes in either consumer or producer prices that accompany the allocative effects might have major implications for the intracountry dis tribution of income. Focusing on the effects of changes in consumer prices, Symons and Walker (1989) found that, on balance, the Commission's initial proposals would slightly increase income in equality in the United Kingdom.7 1 Although low income households would benefit from lower taxes on tobacco and alcohol, this would be more than offset by the regressive elements of the proposals in particular, higher taxes on food, fuel, and chil dren's clothing (assuming the abolition of the zero VAT rate).…”