Browsing by Author "Thomas, Alastair"

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Open Access
The Distributional Effects of Consumption Taxes in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2015) Thomas, Alastair
This paper investigates the distributional effects of the GST in New Zealand, and the case for the introduction of reduced rates to address distributional concerns. The analysis is based on a consumption tax micro-simulation model constructed using expenditure micro-data from the Household Economic Survey for 2012/13. The distributional effects of excise taxes on tobacco, alcohol and petrol are also considered. The paper finds that the lifetime distributional impact of the GST is either proportional or at worst slightly regressive. Excise taxes are also found to be roughly proportional or slightly regressive, though they are of far smaller magnitude than GST burdens. Simulation results show that the introduction of a European-style multi-rate GST system would have a progressive impact on overall GST burdens, but that such a reform would benefit richer households significantly more than poorer households in dollar terms. Given it is the overall progressivity of the tax system that matters, New Zealand’s current approach of providing targeted support to poorer households via the Working for Families tax credit package can be seen as a far more cost effective way of supporting poorer households than the introduction of reduced GST rates for specific expenditure items.
Open Access
Who Would Win from a Multi-rate GST in New Zealand: Evidence from a QUAIDS Model
(Te Herenga Waka—Victoria University of Wellington, 2019) Thomas, Alastair
This paper provides the first estimates of a Quadratic Almost Ideal Demand System (QUAIDS) for New Zealand and uses this model to investigate the distributional effects of a move to a multi-rate GST system. The estimated QUAIDS model covers nine non-durable expenditure groups and produces highly plausible expenditure and price elasticity estimates. Behavioural simulation results show that a multi-rate GST structure would, on average, benefit poorer households relative to richer households – both in terms of the tax households pay and money-metric welfare. However, around 27% of the poorest decile would lose from the reform due to their particular consumption preferences, while around 19% of the richest decile would gain. Behavioural simulation results also confirm the finding from previous non-behavioural analysis that the distributional impact of reduced GST rates can vary significantly depending on the type of expenditure subject to the reduced rate. Overall, the GST system is found to be a poor mechanism for targeting support to poorer households.