Alastair Thomas

Equity impacts of price policies to promote healthy behaviours

Governments can use fiscal policies to regulate the prices and consumption of potentially unhealthy products. However, policies aimed at reducing consumption by increasing prices, for example by taxation, might impose an unfair financial burden on low-income households. We used data from household expenditure surveys to estimate patterns of expenditure on potentially unhealthy products by socioeconomic status, with a primary focus on low-income and middle-income countries. Price policies affect the consumption and expenditure of a larger number of high-income households than low-income households, and any resulting price increases tend to be financed disproportionately by high-income households. As a share of all household consumption, however, price increases are often a larger financial burden for low-income households than for high-income households, most consistently in the case of tobacco, depending on how much consumption decreases in response to increased prices. Large health benefits often accrue to individual low-income consumers because of their strong response to price changes. The potentially larger financial burden on low-income households created by taxation could be mitigated by a pro-poor use of the generated tax revenues.

The elasticity of taxable income in New Zealand: Evidence from the 1986 tax reform

This paper uses the 1986 New Zealand tax reform as a ‘natural experiment’ to estimate the elasticity of taxable income for New Zealand. Adopting the methodology of Auten and Carroll (1999), elasticity estimates ranging from 0.34 to 0.52 are obtained. These results imply a significant behavioural response to tax rate changes well in excess of that implied by standard labour supply elasticity estimates, and suggest that the welfare costs of taxation in New Zealand are larger than may have previously been considered.

Taxing Energy Use: Patterns and Incoherencies in Energy Taxation in Europe and the OECD

This article compares effective tax rates, in energy and carbon terms, on the full spectrum of energy use in 21 European Union countries and across all OECD countries. The analysis highlights the different tax rates that apply to energy in both groups, with higher and more consistent taxation of energy being observed in the EU-21 countries than in the OECD as a whole. Nonetheless, differences in the taxation of fuels used for similar purposes, or between users of fuels are observed across and within all countries examined. From an environmental policy perspective differences of particular note include the common tax preference provided to diesel relative to gasoline for road use and the low tax rates applied to many fuels employed for heating and process use, and particularly to coal. The analysis suggests that countries are not fully harnessing the full power of taxes on energy use for environmental purposes and that realignment of energy taxes could help to ensure that countries pursue their environmental, social and economic goals as effectively as possible.