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ItemExcise taxation in New ZealandCreedy, J. ; Sleeman, C. ( 2005-03)In New Zealand, excise taxes are levied on three commodity groups: alcohol, tobacco andpetrol. The 2001 Tax Review, published by the New Zealand Treasury, argued thatexcises are inequitable and inefficient, and advised that these taxes should be removedand the revenue replaced by raising the standard rate of GST. This paper provides anempirical examination of these issues. First, the efficiency of New Zealand’s currentsystem of indirect taxes is examined. The welfare and redistributive effects resulting fromthe revenue-neutral removal of excise taxes are then examined. Welfare and redistributivemeasures are computed for a range of demographic groups and total weekly expenditurelevels. While the largest efficiency gains and reductions in inequality are observed forhouseholds with at least one smoker, the overall distributional implications of theproposed reforms are found to be small.
ItemIndirect taxation and progressivity: revenue and welfare changesCreedy, J. ; Sleeman, C. ( 2005-03)This paper compares the disproportional effects of indirect taxation using two alternativemeasures, tax-progressivity and welfare-progressivity. In the context of an indirect taximposed on a single good, tax-progressivity requires the taxed good to be luxury. Incontrast, welfare-progressivity requires the equivalent variation as fraction of totalexpenditure to rise with total expenditure. Sufficient conditions for welfare-progressivityare derived for both the Linear Expenditure System (LES) and the Almost Ideal DemandSystem (AIDS). When the parameters of the direct utility functions are held constant,imposing homogeneous preferences, the condition required for welfare-progressivity isthe same as that required for tax-progressivity, namely that the taxed good is a luxury.Parameter constancy also implies a particular pattern for the variation in budget shareswith total expenditure, which is unique for each demand system. When parameters areallowed to vary with total expenditure, according to a general budget share relationship,which enables preference heterogeneity amongst households, welfare-progressivity isindependent of tax-progressivity for both models, giving rise to possible conflicts in taxand welfare disproportionality. The empirical application of these conditions to NewZealand data shows that many such cases of conflict can arise. Furthermore, conflictingresults are also obtained when examining the effects of the overall indirect tax structure.The majority of conflicts arise where tax-regressivity exists at the same time as welfare-progressivity.
ItemCarbon taxation, prices and welfare in New ZealandCreedy, J. ; Sleeman, C. ( 2005-03)This paper examines the effects on consumer prices arising from imposing a carbon tax inNew Zealand, using information about inter-industry transactions and the use of fossilfuels by industries. The welfare effects of the carbon tax are examined for a range ofdifferent household types. Finally, overall measures of inequality are reported.