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The Final Incidence of Australian Indirect Taxes
Author(s) -
Scutella Rosanna
Publication year - 1999
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.00123
Subject(s) - tax deferral , tax incidence , margin (machine learning) , value added tax , indirect tax , revenue , sales tax , economics , tax reform , public economics , business , tax revenue , service (business) , ad valorem tax , state income tax , finance , economy , gross income , machine learning , computer science
The Australian Bureau of Statistics provides a breakdown by industry of the revenue collected from each of the major indirect taxes in Australia. This information does not show who bears the ultimate burden of indirect tax as each industry may pass on its initial burden to others. Thus, the burden of the tax may be passed on round by round to indirect business purchases and final demand until the total burden of the tax is passed onto the final consumer. Using a method to derive final indirect tax incidence developed from earlier studies, the final incidence of a selection of indirect taxes in Australia is presented. The major innovation is to include the use of margin industries in the initial flows of the input‐output matrix ensuring that taxes on inputs to margin services are fully passed forward onto the good or service that the consumer purchases. It is found that many goods and services that are initially exempt from the main indirect taxes, such as the wholesale sales tax, have significant effective tax rates once taxes on inputs to industry are taken into account.