Heidelberg Congress on Taxing Consumption : proceedings of the International Congress on Taxing Consumption, held at Heidelberg, June 28-30, 1989

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Heidelberg Congress on Taxing Consumption : proceedings of the International Congress on Taxing Consumption, held at Heidelberg, June 28-30, 1989

Manfred Rose, (ed.) ; with contributions by Henry J. Aaron ... [et al.]

Springer-Verlag, c1990

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Includes bibliographical references

Description and Table of Contents

Description

A tax reform policy aiming at a growth of prosperity requires basic guidelines. These would have to serve as a standard evaluation model for the precise assessment of the current tax system and the development of tax reform proposals. For market economies the concept of a consumption-based tax system is gaining increasing importance, especially with respect to economic efficiency. An ideal concept for reforming direct taxes would be the requirement of aligning tax bases directly to consumed income, that is, to exempt saved and invested income from taxation. The present volume contains papers dealing with the pros and cons of such a consumption-based tax system and of taxing lifetime consumption. Papers presented in this volume come from leading international scientists who discuss the tax reform under theoretical, political, legal and administrative aspects.

Table of Contents

  • One: Opening Lectures.- The Superiority of a Consumption-Based Tax System.- I. Introduction.- II. Alternative Ways of Attaining a Consumption-based Tax System.- III. Principal Reasons fovouring the Consumption Approach in Taxation.- A. Tax Incidence and the Real Burden of Taxation.- B. Functional Efficiency Virtues of Taxing Consumption.- C. Minimizing Excess Burdens by Taxing Consumption.- D. Equity Virtues of Taxing Consumption.- IV. Strategies in Favour of a Consumption-based Tax System.- On Choosing the "Correct" Tax Base - A Historical Perspective.- I. National Income or Output as Potential Base.- II. Personal Income as Index of Taxable Capacity.- III. The Case for Consumption as Tax Base.- IV. Minimizing Dead-Weight Loss.- Two: Theoretical and Empirical Foundations of Taxing Consumption.- The Short Run and Long Run Welfare Effects of Implementing a Practical System of Consumption Taxation.- I. Introduction.- II. Main Issues in the Design of a Feasible Consumption Tax Base.- III. The Effects of Personal Tax Base Reform on Saving and Welfare.- IV. Dynamic Welfare Economics: A Cursory Review of the Literature.- V. The Relevance of Dynamic Welfare Theory for Tax Reform.- Comments by Michael Ahlheim.- Consumption and Income Taxation: Horizontal Equity and Life Cycle Issues.- I. Introduction.- II. Income and Consumption Taxes in a Simple Life Cycle Model.- III. Extensions to the Basic Model.- IV. Principles of Horizontal Equity.- V. Conclusions.- Comments by Syed M. Ahsan.- Taxation of Income, Consumption, and Wages in an Open Economy.- I. Introduction.- II. The Household Sector.- III. The Business Sector.- IV. The Government.- V. The Model with Exogenous Terms of Trade.- VI. The Effects of Tax Policy when the Terms of Trade are Exogenous.- VII. Tax Policy and the Terms of Trade.- VIII. Summary and Conclusion.- Comments by Pierre Pestieau.- On the Specification of Simulation Models for Evaluating Income and Consumption Taxes.- I. Introduction.- II. The Simulation Models.- A. A Model with a Simple Present/Future Choice.- B. Infinite-Horizon Model.- C. Overlapping-Generations Life-Cycle Model.- III. Results.- IV. Conclusion.- Comments by Gunter Stephan.- Comments by Karl W. Roskamp.- Three: Taxing Consumption from a Public Choice and Constitutional Point of View.- Consumption Taxation and Democratic Process.- I. The Public Choice Approach to Tax Issues.- II. The Political Model: Modified Leviathan.- III. Tax Substitution: Consumption versus Income Taxation.- A. Consumption Tax and Tax Efficiency.- B. Cost Share Effects.- C. Fiscal Illusion.- D. Summary.- IV. Tax Supplementation: Consumption Tax and the Tax Mix.- V. In Summation.- Comments by Peter Bernholz.- Comments by Frans van Winden.- Public Choice and the Consumption Tax.- I. Public Choice Considerations.- II. Flies in the Public Choice Ointment.- III. The Adoption of the Personal Income Tax in the United States.- IV. Conclusions.- Comments by Bengt-Arne Wickstrom.- Fiscal Principle, Fiscal Politics, and Consumption Taxation.- I. Fiscal Principle and the Grammar of Tax Advocacy.- II. Optimal Discrimination through Political Processes?.- III. Self Interest, Political Incentive, and Consumption Taxation.- IV. Fiscal Politics in Constitutional Perspective.- Comments by Charles B. Blankart.- Four: Legal Aspects of Taxing Consumption.- Taxing Consumption from a Legislative Point of View.- I. Introduction.- II. Constitutional Fundamentals of Taxation.- A. Taxation in a Democratic State Based on the Rule of Law.- 1. The Rule of Law.- 2. Reform of the Tax Law in a Democracy.- 2.1. Stable und Unstable Elements of the Law in a Democracy.- 2.2. Juridico-Economie Perspectives of Tax Reforms.- 2.3. Fundamental Reform of the Tax Law in a Democracy?.- B. Equality, Liberty and Social Solidarity as Constitutional Fundamentals for a Consumption-orientated Reform of Tax Systems.- 1. On the Constitutionally Guaranteed Basic Consensus as regards Equality, Liberty and Social Solidarity.- 2. Equality.- 2.1. System-Consistent Taxation in Accordance with the Ability to Pay.- 2.2. Consumption as a Fair Indicator of a Person's Ability to Pay Taxes.- 3. Liberty and Social Solidarity.- 3.1. The Concept of the "Social Market Economy".- 3.2. Adequacy of Consumption Taxation within a Free Enterprise System.- 3.3. Neutrality of Consumption Taxation.- 3.4. Prerequisites for Social Solidarity.- III. Approaches to a Consumption-orientated Reform of the German Tax System.- A. Necessity for a Multiple Tax System Based on Diverse Ability-to-pay Indicators.- B. Juridico-Institutional Framework.- C. Substitution of the Income Tax, the Corporation Tax, the Trade Tax (Gewerbesteuer) and the Wealth Tax (Vermogensteuer) by a General Tax on the Consumed Income and a General Tax on the Saved Income.- D. Extension of the Corporation Tax to a General Tax on the Saved Income.- 1. Approach: Separate Taxation of Saved Income and Consumable Income.- 2. The General Tax on the Saved Income as a "Business Tax" ("Betriebsteuer")
  • Technicalities.- 3. Relationship between the Proportional "Business Tax" and the Progressive Tax on the Consumable Income.- E. On the Legislative Realization of the Concept.- IV. Summary.- Five: Administrative Aspects of a Consumption-based Tax System.- Administrative Advantages of the Individual Tax Prepayment Approach to the Direct Taxation of Consumption.- I. Introduction.- II. Main Features of Income and Consumption Taxes.- A. The Income Tax.- B. The ICF/RF Consumption Tax.- C. The ITP/R Consumption Tax.- III. A Comparison of Consumption and Income Taxes.- A. Relative Advantages of Consumption-based Taxation.- B. Relative Disadvantages of the Consumption-based Tax.- IV. Advantages of the ITP/R Tax Over the ICF/RF Tax.- A. Individual Issues.- B. Business Tax Issues.- V. Problems of the ITP/R Approach.- A. Problems Related to the ITP/R Treatment of Interest.- B. Other Structural Issues.- C. Transitional Issues.- VI. Conclusion.- Appendix Income and Consumption Taxes: Structural Issues.- A. Consumption vs. Income Treatment of Businesses.- B. The Treatment of Business Investment and Debt.- C. Consumption vs. Income Tax Treatment of Individuals.- D. The Treatment of Gifts and Bequests.- Comments by Wolfram F. Richter.- Alternate Roads to Consumption Taxation - Administration Versus Tax Structure.- I. Background Issues.- A. Transfer Payments.- B. Open Economies.- C. Withholding.- II. Administrative Considerations in Selecting Among Personal Consumption Taxes.- III. Conclusion.- Comments by Sven-Olof Lodin.- Administration Problems of an Expenditure Tax.- I. Administration: The Achilles' Heel of an Expenditure Tax.- II. Methods of Expenditure Tax Administration.- A. The Direct Method of Expenditure Tax Administration.- B. The Cash-Flow Method of Expenditure Tax Administration.- C. The Wealth-Accrual Method of Expenditure Tax Administration.- D. The Tax-Prepayment Method of Expenditure Tax Administration.- E. The Taxing-Business-Cash-Flows-Cum-Wages Method of Expenditure Tax Administration.- III. Consumer Durables: The Main Administrative Blunder of an Expenditure Tax.- IV. Gifts, Bequests, and Exchanges.- V. Interest Payments.- VI. Insurance, Social Security Contributions, Lotteries, and Necessitous Expenditures.- VII. What must be Registered?.- VIII. Problems of International Taxation.- IX. Problems of Regime Transition.- X. Evaluating of an Expenditure Tax.- Comments by Albert J. Radler.- Six: Taxing Consumption from an International Point of View.- International Coordination Problems of Substituting Consumption for Income Taxation.- I. Role of Taxes and Tax Coordination in International Setting.- A. Types of Tax and Base Assignment.- B. Coordination and its Objectives.- 1. Internation Equity: Entitlement to Tax Bases.- 2. Internation Equity: Burden Shifting.- 3. Allocative Efficiency.- 4. Interresident Equity.- C. Coordination or Competition?.- D. Harmonization, Equalization or Centralization?.- II. Coordination of Symmetrical Income Tax Systems.- A. Individual Income Tax.- B. Absolute Corporation Income Tax.- C. Integrated Corporation Tax.- III. Coordination of Symmetrical Consumption Tax Systems.- A. In Rem Consumption Taxes.- 1. Coordination Requirements: Internation Equity.- 2. Coordination Requirements: Neutrality.- B. Personal Consumption Taxes.- 1. Coordination Requirements: Internation Equity.- 2. Coordination Requirements: Neutrality.- C. Business Cash Flow Tax.- 1. Coordination Requirements: Internation Equity.- 2. Coordination Requirements: Neutrality.- IV. Coordination of Consumption Taxes with Income Taxes.- A. Coordination Requirements: Internation Equity.- B. Coordination Requirements: Neutrality.- V. Summary and Conclusion.- Comments by Norbert Andel.- Comments by Klaus Vogel.- Problems of International Tax Coordination under Alternative Consumption Tax Regimes.- I. Introduction.- II. International Problems.- A. The Structure of Problems.- B. World-wide Consumption Taxation.- 1. Consumption.- 2. Savings.- 3. Income.- C. Unilateral C-taxation.- 1. Consumption.- 2. Savings.- 3. Income.- III. Conclusion.- Comments by Rolf Caesar.- Do International Tax Relations Impede a Shift Towards Expenditure Taxation?.- I. Introduction.- II. The Range of International Tax Arrangements.- III. Expenditure Tax Scenarios.- IV. International Tax Relations and Value Added Tax.- V. International Tax Relations and Cash-Flow Company Taxes.- VI. International Tax Relations and a Personal Expenditure Tax.- VII. A Political Economy View of Tax Reforms in Open Economies.- VIII. Conclusion.- Comments by Francesco Forte.- Comments by Klaus Vogel.- Participants.

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