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The Income Elasticity of Tax Revenue: Estimates for Income and Consumption Taxes in the United Kingdom

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Abstract

This paper provides estimates of individual and aggregate revenue elasticities of income and consumption taxes in the UK over the period 1989-2000. Its shows how budgetary changes, including changes to income-related deductions, have substantially affected income elasticities. The estimates of consumption tax revenue elasticities show that changes in consumption patterns over time are important. A merit of the approach used here is that elasticity estimates can be calculated readily from official published sources.

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