Decomposing the Marginal Excess Burden of Australia’s Goods and Services Tax

Verikios, George and Patron, Jodie and Gharibnavaz, Reza (2017): Decomposing the Marginal Excess Burden of Australia’s Goods and Services Tax.

Abstract

We estimate the marginal excess burden of the GST and its components. Our results show that the GST is highly distortionary in its treatment of intermediate inputs and investment, but is efficient as applied to household consumption. We also estimate the general equilibrium effects of changes to the GST base and rate, and its removal from investment. The general equilibrium estimates support the marginal excess burden estimates. Our results suggest that the efficiency of the GST could be improved by broadening the consumption base or removing it from investment. Simply increasing the GST rate would be welfare decreasing.

• Item Type: MPRA Paper
• Language: English
• Keywords: computable general equilibrium, differential incidence, goods and services tax, marginal excess burden, tax reform, value-added tax.
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence

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