Abstract
Marginal indirect tax reform analysis evaluates for each commodity (group) the marginal welfare cost (MC) of increasing government revenue by one euro by raising the indirect tax rate on that commodity. In this paper, an adjustment to the MC expressions is proposed to allow for (de)merit good arguments and it is shown how this adjustment can easily be parameterized on the basis of econometric demand analysis.
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I would like to thank two anonymuous referees for their constructive comments on an earlier version of this paper. Also, comments by Agnar Sandmo are gratefully acknowledged. This paper was presented at a symposium in Antwerp (September 2008) in honor of my microeconomics teacher, Professor Wilfried Pauwels.
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Schroyen, F. Operational expressions for the marginal cost of indirect taxation when merit arguments matter. Int Tax Public Finance 17, 43–51 (2010). https://doi.org/10.1007/s10797-008-9098-4
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DOI: https://doi.org/10.1007/s10797-008-9098-4