Horizontal Inequity and Vertical Redistribution with Indirect Taxes: The Greek Case*

Abstract

Non‐uniform indirect taxes treat equals and those unequal differently (horizontal inequity and vertical redistribution). Horizontal inequity is caused by taste differences among similar households, but some excises are designed to reflect social, not revealed, preferences. We apply two methodologies for decomposing the overall redistributive effect of the present and three alternative indirect tax structures into vertical and horizontal effects for Greece, using the 1998–99 Household Expenditure Survey micro‐database. In all cases, the taste component is considerable, even when we allow for social preferences, while improvements in vertical redistribution can be achieved, albeit at the cost of increased horizontal inequity.

Progressivity of Taxes and Transfers: The Mexican Case 2012

“…In this seminal work, a proportional tax system was found as a result of the mutual mix neutralization induced by progressive and regressive taxes. More research of the topic can be found for other developed countries and more recently, for some developing and transitional economies (Duclos and Tabi, 1996;Davidson and Duclos, 1997;Makdissi and Wodon, 2002;Duclos, et al, 2003;Duclos, et al 2005;Araar, 2008;Kaplanoglou and Newberry, 2008;Bibi and Duclos, 2010;Bird and Gendron 2011;Lustig, et al 2012;Cok, et al, 2012). For the Canadian case, Duclos and Tabi (1996) and Davidson and Duclos (1997) using microdata from the Canadian Surveys of Consumer and Finances assessed effective progressivity with the Tax-Redistributive approach (TR).…”

“…He concludes for the progressivity of the fiscal system that enables to maintain the size of poor and middle classes. Kaplanoglou and Newberry (2008) have estimated for Greece in 1999 the HI and Vertical redistribution components using only indirect taxes finding that a less vertical negative effect can be attained even when more HI is induced in the classical sense and re-ranking by the indirect reforms for this country. Bibi and Duclos (2010) study the poverty dominance of fiscal system for five developed countries.…”

Income redistribution and inequality in the Mexican tax-benefit system

“…Findings revealed that countries achieved a higher inequality reduction mainly by using non-means tested benefits and taxes. Kaplanoglou and Newberry (2008) analysed alternative indirect tax structures in Greece and estimated the redistributive effect of the vertical and HI components. They found that VE is possible, even when more HI is induced by indirect tax reforms.…”

Redistribution of Taxes and Benefits in Mexico: Evaluation of the 2014 Fiscal Reform on Households

“…Pechman and Okner (1974) represented a strong basis in the related research for a proportional tax system, derived from the mix of neutralization influenced by the progressive and regressive tax figures. This topic is addressed for developed countries as well as for some developing and transitional economies (Duclos and Tabi, 1996;Davidson and Duclos, 1997;Duclos, Jalbert and Araar, 2003;Duclos, Makdissi and Wodon, 2005;Araar, 2008;Kaplanoglou and Newberry, 2008;Bibi and Duclos, 2010;Duclos, Makdissi and Aaraar, 2010;Bird and Gendron, 2011;Cok, Urban and Verbic, 2013;Lustig, Pessino and Scott, 2014;Scott, 2014). Duclos and Tabi (1996) and Davidson and Duclos (1997) developed an application using microdata from the Canadian Surveys of Consumer and Finances to evaluate effective progressivity with a focus on the Tax-Redistributive approach (tr).…”

“…More recently, Araar (2008) and Huesca and Araar (2016) proposed an empirical application to compare progressivity over time. In the former research, the impact of the fiscal system is measured based on the size and welfare of socio-economic classes in the Canadian case; while in the latter, a formal robust comparison is used to determine how progressivity can be checked over time in Mexico during 2004Mexico during -2012 In the international arena, for Greece, Kaplanoglou and Newberry (2008) estimated in the 1990s hi and ve components and found a vertical negative effect attributed to reranking by the indirect reforms for this country. A novel technique to study the impact on poverty dominance from the fiscal systems for five developed countries was developed by Bibi and Duclos (2010).…”