Prague Economic Papers 2010, 19(2):133-149 | DOI: 10.18267/j.pep.368

Impact of Harmonisation on Distribution of VAT in the Czech Republic

Barbora Slintáková, Stanislav Klazar
Univerzity of Economics, Prague (barbora@vse.cz; klazar@vse.cz).

The aim of this paper is to analyse progressivity of value added tax in the Czech Republic under the framework of both annual incidence and lifetime incidence. Moreover, impact of the harmonisation of VAT rates connected with the accession of the Czech Republic to the EU on the income distribution is examined. The burden table serves to show the distribution of the VAT burden among households by income categories; the generalised entropy measures and the Gini coefficient are used for measurement of inequality of income. Results show that the Czech VAT is regressive when annual income is analysed while the lifetime income analysis indicated that VAT is progressive. Furthermore, the results suggest that the distribution of income (annual as well as lifetime) after taxation was more equal before the harmonisation, and that impact of the changes in VAT rates in 2004 was likely larger on the lower-income households.

Keywords: value added tax, tax incidence, progressivity, redistributive effect, inequality measures, tax harmonisation
JEL classification: H22, H23

Published: January 1, 2010  Show citation

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Slintáková, B., & Klazar, S. (2010). Impact of Harmonisation on Distribution of VAT in the Czech Republic. Prague Economic Papers, 19(2), 133-149. doi: 10.18267/j.pep.368
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