Taxation and welfare: measuring the effect of Bulgaria’s 2007-08 corporate-personal income tax reforms

Vasilev, Aleksandar (2020) Taxation and welfare: measuring the effect of Bulgaria’s 2007-08 corporate-personal income tax reforms. Theoretical and Practical Research in Economic Fields, 10 (2). pp. 113-117. ISSN 2068-7710

Full content URL: https://doi.org/10.14505//tpref.v10.2(20).04

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Taxation and welfare: measuring the effect of Bulgaria’s 2007-08 corporate-personal income tax reforms
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Abstract

This paper utilizes a simple general-equilibrium model to analyse the long-run effects of Bulgaria’s 2007-08 corporate-personal income tax reforms. In particular, we consider the effect working through the firm’s capital structure, and argue that the new reforms incentivize firms to increase investment, as the new regime benefits retained earnings. The increase in capital increases output and productivity, which in turn increases consumption and welfare. On average, households are enjoying 8.65% higher consumption in the new steady-state in the benchmark scenario. As a robustness check, we allow for a variable labor supply, where the gain increases further by additional 3.9% of consumption, to produce an overall gain of 13.55%.

Keywords:tax reform, taxation, welfare, Bulgaria
Subjects:L Social studies > L120 Microeconomics
L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:43802
Deposited On:17 Feb 2021 15:36

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