recent vat changes who gained who lost by micheal collins pdf version
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Recent VAT Changes: who gained? who lost?
Dr Micheál Collins
NERI (Nevin Economic Research Institute)
Dublin
@ MLGCollins
www.NERInstitute.net
TASC Lunchtime Seminar, Dublin
October 1st 2014
Outline 1. Introduction
2. Indirect Taxation Model
3. Representativeness of the Model
4. Income Categories
5. Recent change no. 1
6. Recent change no. 2
7. Conclusion
1. Introduction • EU wide changes to VAT since 2008 (22/28)
• Ireland changes VAT a lot
• Ireland – Troika programme = 2 changes
(i) Temporary introduction and subsequent retention of
second reduced rate of VAT (13.5% 9%)
(ii) An increase in the standard VAT rate from 21% to 23%
• Collective revenue gains/loss = €1bn per annum
• Looking at the impact of these o NERI working paper (2014/19)
o NERI Research in Brief
2. Indirect Taxation Model • Developed based on 2009/10 Household Budget
Survey microdata
• Allows us to look at VAT, Excise, Levies and other
indirect taxes
• A lot of misery…see Collins and Turnbull (2013) and
Collins (2014a)
• Provides a baseline
• Using equivalised gross household income deciles
and overall averages (state)
3. Representativeness • 2009/10 consumption data – but things have not
changed a lot since then
• 2009/10 income data – decreases, but HBS in line
with where SILC is for 2011 & 2012
• Captures VAT tax take from household well
o EC report (2013)
o 2001-2011: 49% of VAT from households
o 2009 = 51%
o 2010 = 53%
o Modelled VAT = 54-56%
4. Income Categories • Using 2 ways of looking at population:
o Equivalised gross household income deciles
o Atkinson and Brandolini’s (2011) income groups
Median equivalised household disposable income
< 60% median income In poverty
60 to <75% of median Margins of poverty / lower middle class
75 to < 125% of median Middle class
125 to < 167% of median Upper middle class
167% + of median Rich
Atkinson and Brandolini’s (2011) income groups
5. Recent Change No. 1 Reduction of item to second reduced rate of VAT
• 2011 Jobs Initiative
• Focused on tourism sector
• Temporary until end 2013; incorporated into VAT
structure in Budget 2014
• €350m per annum in revenue forgone
• Modelling assumptions
Average household
Exchequer € from households
Overall Exchequer €*
Household yield as % of overall
+€140 -€231m -€350m 66%
Average household
Exchequer € from households
Overall Exchequer €*
Household yield as % of overall
+€140 -€231m -€350m 66%
6. Recent Change No. 2 Increase in the standard VAT rate from 21% to 23%
• Budget 2012
• Troika programme and National Recovery Plan
• €670m per annum in revenue gains to exchequer
• No Dep of Finance assessment of impact
• A guess in the Budget speech by the Minister
• No challenge to assumption of progressive…
• Modelling assumptions
Average household
Exchequer € from households
Overall Exchequer €*
Household yield as % of overall
-€207 +€342m +€670m 51%
Average household
Exchequer € from households
Overall Exchequer €*
Household yield as % of overall
-€207 +€342m +€670m 51%
7. Conclusion • Indirect taxes sweep across all sectors of the
population
• These recent reforms totalling €1bn
• Both progressive and regressive
• Collectively, regressive
• VAT changes occur in Budget context, but useful to
know what their impact has been
Recent VAT Changes: who gained? who lost?
Dr Micheál Collins
NERI (Nevin Economic Research Institute)
Dublin
@ MLGCollins
www.NERInstitute.net
TASC Lunchtime Seminar, Dublin
October 1st 2014