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This paper provides an analysis of revenue and welfare effects associated with a VAT exemption of financial services, which is common among OECD countries. We follow a general equilibrium approach which takes account of the input-output structure of the economy. This allows us to discuss the various effects of repealing the VAT exemption not only on consumer demand and intermediate-input demand but also on labor supply. We derive formal expressions for revenue and welfare effects, which can be quantified with a minimum of information about behavioral effects. Using VAT statistics as well as national accounts we compute the effects of repealing the VAT exemption in Germany. Our baseline estimate indicates that tax revenues would increase by some e 1.2 billion or 0.9% of VAT revenues (excluding import turnover tax). If the revenue gains are used to finance a reduction in the distortive labor tax, however, our results point at a modest welfare gain of e 0.675 Billion.

The data presented suggest that patients suffering from chronic pain are not optimally managed in Middle Franconia. Regional institutions for multidisciplinary pain treatment have to be established close to where chronic pain patients live.

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