Reducing the regressivity of indirect taxation in Brazil through a personalized value-added tax

This study makes an attempt to trace out the extent to which (in)direct taxation distorts consumers’ behavior, thus being a hindrance towards achieving an optimal allocation of resources between equity and efficiency targets. To substantiate our argument, a utility maximization model is built to examine whether fiscal policy restores public confidence in attaining equilibrium between the marginal rate of substitution (MRS) and the marginal rate of transformation (MRT). The validity of our model is then tested by using a sample of eleven countries. Comparing actual with optimal (in)direct tax rates, we find that the tax system of eight countries tends to favor equity over efficiency (actual direct (indirect) tax rates higher (lower) than optimal direct (indirect) tax rates) and the tax system of three countries tends to apply the efficiency principle.

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Reducing the regressivity of indirect taxation in Brazil through a personalized value-added tax

Cited by 4 publications

References 8 publications

Longevity of EU membership and VAT practices: Dependencies, Contradictions And Implications

Longevity of EU membership and VAT practices: Dependencies, Contradictions And Implications

The impact of the shadow economy on the direct-indirect tax mix: Can central banks’ independence mitigate the effect?

Fiscal Aspects of the Equity-Efficiency Trade-Off

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