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The Distributional Effects of Consumption Taxes in OECD Countries

image of The Distributional Effects of Consumption Taxes in OECD Countries

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.

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Foreword and acknowledgements

Recent OECD research highlights the potential growth benefits of shifting the tax mix towards consumption taxes. In particular, there is a strong case for countries to broaden their value-added tax (VAT) bases, not just to raise revenue, but to reduce the substantial compliance costs and distortions to consumption decisions that arise from multi-rate VAT systems. In practice, however, governments have often been reluctant to embrace VAT base broadening measures because of a range of concerns. Foremost of these is the widely held view that the poor are hit hardest by increases in standard and reduced VAT rates.

English

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