Progressivity Index of Sales Tax on Individual Expenditure Items in Australia*
*This paper is a part of the study entitled ‘Income and Welfare in Australia’ which is being carried out with the support of a grant by the Reserve Bank of Australia. The views expressed here are not neecssarily those of the Reserve Bank. I would like to thank Professor John Nevile and two anonymous referees for helpful comments. All errors arc, of course, my own. I am also grateful to Michael Mekhitarian who provided the computational assistance.
Abstract
The main contribution of this paper is to provide the estimates of the degree of progressivity (or regressivity) of the sales or excise tax on more than 300 individual consumption items. This is the first tax incidence study which considers such a fine classification of goods and services. The estimates based on the Australian Household Expenditure Survey 1975–7 6 provide a guideline for determining the tax rates on individual consumption items. Several interesting findings which emerge from the numerical results given in the paper suggest the usefulness of considering such a fine classification of goods and services.
