The increase in value-added tax: the long-term effects of alternative uses of the funds

Abstract

"At the start of January 2007, the value-added tax rate increased from 16 to 19 per cent. The 'grand coalition' intends to use the additional tax revenues that are likely to accrue as a result of this increase for the sole purpose of consolidating the national budget. However, the tax increase will have a strong negative impact on domestic demand and, thus, employment. Alternatively, the additional tax revenues could be used to reduce labour costs. Our simulations show that this - compared to the budget-consolidation scenario - would result in an additional 380,000 to 550,000 persons being employed in three years' time. An even higher increase in employment - 450,000 to 650,000 persons - could be achieved by investing the additional tax revenue in education, R&D or infrastructure." (Author's abstract, IAB-Doku) ((en))

Cite article

Schnur, P. & Zika, G. (2007): Mehrwertsteuererhöhung: Längerfristige Effekte alternativer Mittelverwendung. In: Sozialer Fortschritt, Vol. 56, No. 4, p. 105-112.