OECD Tax Policy Studies The Distributional Effects of Consumption Taxes in OECD Countries.

This report examines the distributional effects of value-added tax (VAT) and excise tax systems in 20 OECD countries, and investigates the effectiveness of reduced VAT rates as a redistributional tool. The first three chapters of this report present a cross-country analysis of the distributional effects of consumption taxes in OECD countries. This analysis consists of two parts: a broad distributional analysis of the overall effects of current VAT and excise tax systems; and an examination of the effectiveness of reduced VAT rates at redistributing income towards poor households. Chapter 4 then provides a more detailed examination of VAT and excise tax systems in Korea, including an analysis of their distributional effects utilising recently released data. Overall results for the 20 countries covered in the report show that VAT systems are regressive when measured as a percentage of income, but are generally either proportional or slightly progressive when measured as a percentage of expenditure. This confirms other recent analysis for several countries, and extends this analysis and these conclusions to a significant number of new countries. Total excise tax burdens (on alcohol, tobacco and transport fuels) are shown to be almost always regressive when measured as a percentage of income, and in most cases to be either regressive or roughly proportional when measured as a percentage of expenditure Foreword Acknowledgements Table of contents Executive summary Chapter 1. Taxing consumption in OECD countries 1.1. Introduction 1.2. Consumption tax revenues 1.3. VAT 1.4. Excise taxes Notes References Chapter 2. The distributional effects of consumption taxes 2.1. Introduction 2.2. Methodology 2.3. Base of analysis: income vs. expenditure 2.4. Distributional effects across income and expenditure deciles 2.5. Distributional effects across demographic factors 2.6. Summary and conclusions Notes References. Chapter 3. The effectiveness of reduced VAT rates as a redistributional tool3.1. Introduction 3.2. Methodology 3.3. Simulation results 3.4. Summary and conclusions Notes References Chapter 4. The VAT system in Korea: Measuring its burden and revenue ratios 4.1. Introduction 4.2. The Korean VAT system 4.3. VAT revenue ratio 4.4. Distribution of VAT burden 4.5. Conclusion Notes References ANNEX A. Demographic breakdowns by decile ANNEX B. Tax expenditure tables: Reduced VAT rates ANNEX C. Burden ratios of the Korean liquor, cigarette and transport fuel taxes. The Report Examines The Distributional Effects Of Value-added Tax (vat) And Excise Tax Systems In 20 Oecd Countries, And Investigates The Effectiveness Of Reduced Vat Rates As A Redistributional Tool.