Value-added taxation and consumption

Abstract

One of the main rationales for taxing consumption rather than income is that it is believed that consumption taxes discourage consumption, encourage savings, and thus generate higher economic growth. However, empirical evidence on the actual effectiveness of consumption taxes in stimulating savings is very limited. In this paper, we estimate the impact of a broad-based consumption tax, the value-added tax (VAT), on the aggregate consumption of fifteen European Union countries over the period 1961-2005. Our empirical results indicate, across a variety of estimation methods and specifications, that a one percentage point increase in the VAT rate leads to roughly a one percent reduction in the level of aggregate consumption in the short run and to a somewhat larger reduction in the long run.

The Impact of Indirect Taxes on Economic Growth

“…Jedná se tedy o poměrně stabilní zdroj příjmů do státního rozpočtu většiny států. Tento závěr je shodný se závěry článků, jako například Alm, El-Ganainy (2013). Vztah daní z přidané hodnoty a ekonomického růstu není možné defi novat jednoznačně, při změně specifi kace modelu totiž docházelo ke změnám výsledků, což je závěr shodný se závěry uveřejněnými v článku Kotlán, Machová a Janíčková (2011).…”

“…Na delší časové období, tj. období 40 let, je zaměřeno jen velmi málo empirických prací, například Alm a El-Ganainy (2013). Závěry většiny empirických prací jsou v souladu s doporučeními EU.…”

Affects Corporate Taxation Economic Growth? - Dynamic Approach for OECD Countries

“…Within individual empirical papers the results considering consumption taxation are ambiguous. Interesting point of view on consumption tax provides Alm and El-Ganainy (2013) who state that indirect taxes have mediated effect on economic growth via investments. They describe the fact that consumption influences investment level as there is substitution effect due to lower consumption and higher savings which finally leads to higher economic growth (as opposite to income taxes).…”

Study to Quantify and Analyse the VAT Gap in the EU-27 Member States

“…For example, it assumes that moving to the benchmark tax would not affect either the level or composition of consumption, which is unlikely (Alm and El-Ganainy 2013). In addition, it assumes that "consumption" as defined in the national accounts is the same as the aggregate tax base that would be subject to such an ideal uniform comprehensive VAT.…”

“…As OECD (2012) shows, however, in principle a number of adjustments to national accounts data are needed to estimate something closer to the real base of the VAT because final consumption as reported in the accounts includes some items that are not subject to VAT and excludes some items that are subject to VAT (see Appendix A for discussion of these adjustments). Finally, even if the national accounts base is simply accepted, several different versions of the c-efficiency ratio may be calculated depending on the precise nature of the consumption base chosen: for example, Alm and El-Ganainy (2013) use final household consumption expenditure (as do Borselli, Chiri, and Romagnano 2012), while the present report, like OECD (2012) and Keen (2013), uses a broader conception of final consumption that also includes such consumption not only by households but also by the government and non-profit sectors. In practice, final consumption is measured in expenditure terms and includes not only private final consumption expenditures by households but also final consumption expenditures by non-profit organizations serving households as well as by general government.…”