The Uneasy Case Against Discriminatory Excise Taxation: Soft Drink Taxes in Ireland  

Oleh:

Bahl, Roy ; Bird, Richard ; Walker, Mary Beth

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Public Finance Review vol. 31 no. 5 (Sep. 2003), page 510-533.
Topik: excise tax; discriminatory tax; soft drinks
Fulltext: 510PFR315.pdf (94.62KB)

Isi artikel

This study uses an empirical case study to investigate the revenue implications of reducing a discriminatory excise tax. The case study is Ireland, which provides a natural experiment because it has both imposed and removed such a discriminatory tax (on soft drinks) in the past two decades. The authors find that soft drink consumption is price elastic, income elastic, and sensitive to weather. They estimate that 30% of the amount of surrendered excise tax revenue is recaptured by the value-added tax and income tax. The remaining 70% loss is further reduced by a small reduction in welfare costs, elimination of administration costs, and reduced compliance costs. The rate-revenue curve has a negative slope, even though demand is price elastic, presumably because marginal costs are rising and the tax reduction is not fully captured in the price reduction. In effect, the authors find undershifting and no evidence of a Laffer effect.

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