Tax Reform and Network Effects
This paper investigates the effects of a tax reform that eliminates tax rate heterogeneity and cumulative taxation using a general equilibrium model with multiple sectors with market power. Industries are connected through input-output linkages, and changes in taxation are not confined within indust...
| Authors: | ; ; ; |
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| Format: | Article |
| Status: | Accepted version |
| Publication date: | 2024 |
| Country: | España |
| Institution: | Universidad de Barcelona |
| Repository: | Dipòsit Digital de la UB |
| OAI Identifier: | oai:diposit.ub.edu:2445/219140 |
| Online Access: | https://hdl.handle.net/2445/219140 |
| Access Level: | Embargoed access |
| Keyword: | Reforma fiscal Producte interior brut Brasil Tax reform Gross domestic product Brazil |
| Summary: | This paper investigates the effects of a tax reform that eliminates tax rate heterogeneity and cumulative taxation using a general equilibrium model with multiple sectors with market power. Industries are connected through input-output linkages, and changes in taxation are not confined within industries. We calibrate the model to Brazil, a country with a highly distorted tax system. The revenue-neutral tax reform generates gains of 7.9% of GDP and 1.8% of welfare. Just eliminating VAT rate dispersion leads to a 6.0% increase in GDP. Due to propagation effects, in 10 sectors direct taxes increased but output and profits did not fall. |
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