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 [email protected] @ MLGCollins www.NERInstitute.net TASC Lunchtime Seminar, Dublin October 1 st 2014

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Page 1: Recent vat changes who gained who lost by micheal collins pdf version

Recent VAT Changes: who gained? who lost?

Dr Micheál Collins

NERI (Nevin Economic Research Institute)

Dublin

[email protected]

@ MLGCollins

www.NERInstitute.net

TASC Lunchtime Seminar, Dublin

October 1st 2014

Page 2: Recent vat changes who gained who lost by micheal collins pdf version

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

Page 3: Recent vat changes who gained who lost by micheal collins pdf version

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

Page 4: Recent vat changes who gained who lost by micheal collins pdf version

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)

Page 5: Recent vat changes who gained who lost by micheal collins pdf version
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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%

Page 9: Recent vat changes who gained who lost by micheal collins pdf version

4. Income Categories • Using 2 ways of looking at population:

o Equivalised gross household income deciles

o Atkinson and Brandolini’s (2011) income groups

Page 10: Recent vat changes who gained who lost by micheal collins pdf version

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

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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

Page 15: Recent vat changes who gained who lost by micheal collins pdf version

Average household

Exchequer € from households

Overall Exchequer €*

Household yield as % of overall

+€140 -€231m -€350m 66%

Page 16: Recent vat changes who gained who lost by micheal collins pdf version

Average household

Exchequer € from households

Overall Exchequer €*

Household yield as % of overall

+€140 -€231m -€350m 66%

Page 17: Recent vat changes who gained who lost by micheal collins pdf version

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

Page 18: Recent vat changes who gained who lost by micheal collins pdf version

Average household

Exchequer € from households

Overall Exchequer €*

Household yield as % of overall

-€207 +€342m +€670m 51%

Page 19: Recent vat changes who gained who lost by micheal collins pdf version

Average household

Exchequer € from households

Overall Exchequer €*

Household yield as % of overall

-€207 +€342m +€670m 51%

Page 20: Recent vat changes who gained who lost by micheal collins pdf version

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

Page 21: Recent vat changes who gained who lost by micheal collins pdf version

Recent VAT Changes: who gained? who lost?

Dr Micheál Collins

NERI (Nevin Economic Research Institute)

Dublin

[email protected]

@ MLGCollins

www.NERInstitute.net

TASC Lunchtime Seminar, Dublin

October 1st 2014