Authors: Jason Nassios and James Giesecke
Harberger (1962) coined the term excess burden to emphasise that taxes impose costs in addition to the revenue they collect. Reviews of Australia's tax system have used point estimates of the excess burden for a series of Australian taxes, among other measures, to motivate and prioritise the nation's reform agenda. In this paper we commence the work needed to elucidate what the optimal tax mix in Australia might look like under alternative revenue raising efforts, by studying how the excess burden of four Australian taxes change as we alter their tax-specific revenue-to-GDP ratios. This is achieved via simulation with a large-scale CGE model with high levels of tax-specific detail. We show that property transfer duties and insurance taxes are highly inefficient even at low levels, strengthening the case for their complete replacement with more efficient taxes.
JEL classification: C68, E62, H2, H71, R38
Keywords: CGE modelling; Immovable property tax; Recurrent property tax; Insurance tax; Value added tax; Personal income tax; Excess burden.
Working Paper Number G-337 can be downloaded in PDF format. To print this you will need the Adobe Acrobat Reader.
Go to working papers page