Wolfgang Wiegard

ACE for Germany? Fighting for a better tax system

Since the mid 80ies, Manfred Rose has been fighting for a fundamental tax reform in Germany. In 1989, he organized the “Heidelberg Congress on Taxing Consumption” (Rose, 1990). Since then, he has been a passionate and untiring advocate of a consumption based tax system. What makes him so special in the public finance community is that he not only contributed to taxation theory. Instead, he went a step further and practically implemented his ideas.

Welfare Effects of Value-Added Tax Harmonization in Europe

I An Introduction to Value-added Taxation.- 1. The Development of Value-added Taxation in the European Union.- 1.1. From the Beginnings to the White Book.- 1.1.1. The Development of Turnover Taxes in Europe.- 1.1.2. The Treaty of Rome.- 1.1.3. Creating a European Value-added Tax.- 1.2. The VAT Harmonization Debate Since 1985.- 1.2.1. The White Paper.- 1.2.2. The 1987/89 Harmonization Proposals.- 1.2.3. A Tough Compromise: The Transitional System.- 1.2.4. What Comes After 1996?.- 2. Principles of Value-added Taxation.- 2.1. Types of Value-added Taxes.- 2.2. The Rate Structure of a Value-added Tax.- 2.3. Calculating Tax Liabilities.- 2.3.1. The Credit or Invoice Method.- 2.3.2. The Addition and the Subtraction Method.- 2.4. International Taxation Principles for VAT.- 2.5. One Further Issue in Value-added Taxation: Exemption Versus Zero Rating.- 3. Questions and Answers: The Plan of the Book.- 3.1. The Questions.- 3.2. The Methodology: Computable General Equilibrium Analysis.- 3.3. The Chapters to Come.- 3.4. Related Work.- II VAT Policy Options for an Integrated Europe.- 1. Some Basic Elements of our Model.- 2. The Destination Principle.- 2.1. Some Institutional Features.- 2.2. A Numerical Example.- 2.3. A More General Formulation.- 3. The Transitional System.- 3.1. Main Institutional Features.- 3.1.1. Intra-community Supplies and Acquisitions.- 3.1.2. Means of Transport.- 3.1.3. Distance Sales.- 3.2. A Numerical Example.- 3.3. A More General Formulation.- 3.3.1. The Switching Option.- 3.3.2. The Mixed System.- 4. The Origin Principle and the Credit Method.- 4.1. Some Institutional Features.- 4.2. A Numerical Example.- 4.3. A More General Formulation.- 4.3.1. The Common Market Principle.- 4.3.2. The Clearing System.- 5. The Origin Principle and the Subtraction Method.- III Theoretical Foundations.- 1. The Command Optimum.- 2. Tax Distortions.- 2.1. Tariffs, Income Taxes, and Production Taxes.- 2.2. Destination-based VAT.- 2.3. Origin-based VAT under the Credit Method.- 2.4. Origin-based VAT under the Subtraction Method.- 3. Trade Neutrality and the Exchange Rate Argument.- 3.1. Trade Neutrality.- 3.2. The Exchange Rate Argument.- 4. Welfare Effects of VAT in Open Economies.- IV From Theory to Application: A Computable General Equilibrium Model.- 1. Operationalizing Walras with CGE Models.- 2. The Theoretical Model.- 2.1. The Production Sector.- 2.1.1. Value Added and Composite Intermediate Products.- 2.1.2. Primary Input Demand.- 2.1.3. Demand for Domestic and Imported Composite Inputs.- 2.1.4. Demand for Imported Inputs.- 2.1.5. Calculating Producer Prices Under the Tax Credit Method.- 2.2. The Household Sector.- 2.2.1. Calculating Price Indices.- 2.2.2. Demand for Leisure and Consumption.- 2.2.3. Demand for Different Consumption Commodities.- 2.2.4. Demand for Domestic and Imported Commodities.- 2.2.5. Demand for Different Imported Commodities.- 2.3. The Public Sector.- 2.3.1. Public Revenues.- 2.3.2. Public Expenditure.- 2.4. The Foreign Sector.- 2.4.1. Balance of Payments.- 2.4.2. Terms of Trade.- 2.5. Equilibrium Conditions of the Model.- 3. A Micro-consistent Data Set for the EU.- 3.1. Consistency Requirements and Data Sources.- 3.2. Data Adjustments.- 3.2.1. Updating the Intermediate Transaction and Final Demand Tables.- 3.2.2. Value Added by Industry.- 3.2.3. Government Revenues and Expenditures.- 3.3. Some Final Remarks.- 4. Model Calibration.- 4.1. Specification of Exogenous Parameter Values.- 4.2. Calibration.- 4.2.1. Calibration in the Production Sector.- 4.2.2. Calibration in the Household Sector.- V Simulation Results and Economic Interpretations.- 1. Some Methodological Issues.- 1.1. Reliability of CGE Results.- 1.2. Measuring Welfare Changes from Tax Reforms.- 2. The Transitional System.- 2.1. The Switching Option.- 2.2. The Mixed System.- 3. The Origin Principle and the Credit Method.- 3.1. The Common Market Principle.- 3.2. The Clearing System.- 4. The Origin Principle and the Subtraction Method.- 4.1. Welfare and Revenue Effects.- 4.2. Equivalence of Statutory Tax Rates on Value Added and Effective Tax Rates on Consumption.- 4.3. Effective Consumption Tax Rates in General Equilibrium: An Example.- 4.4. Decomposing and Explaining Welfare Effects.- 5. Some Sensitivity Analysis.- 5.1. Varying Key Parameter Values.- 5.2. Varying the Data Set.- VI Summary and Conclusions.- List of Abbreviations.- Glossary of Notation.- The Debate about Value-added Taxation in the European Union: Timetable of Events since 1985.- References.

Lohnt sich eine konsumorientierte Neugestaltung des Steuersystems

Seit dem „Heidelberger Konsumsteuerkongres“1 wird auch im deutschsprachigen Raum vehement uber die Vorteilhaftigkeit einer konsumorientierten Neuordnung des Steuersystems gestritten. Dabei geht der Ris zwischen Befurwortern und Skeptikern quer durch alle drei Steuerwissenschaften, die Finanzwissenschaft, die betriebswirtschaftliche und die juristische Steuerlehre. Zu den vehementesten Verfechtern einer Konsumbesteuerung gehoren sicherlich die Steuerwissenschaftler Rose (Heidelberg), Wagner (Tubingen) und Wenger (Wurzburg), die als (inzwischen wohl aufgeloste) KNS-Steuerreformgruppe2 unermudlich und scharfzungig fur ihre steuerpolitischen Ideale eingetreten ist. Und dies mit betrachtlichem Erfolg. So hat die Republik Kroatien im Jahre 1994 auf Ratschlag und unter Beteiligung der KNS-Steuerexperten als erstes Land die von Rose/Wagner/Wenger favorisierte zinsbereinigte Einkommen-und Gewinnsteuer eingefuhrt. Und auch in der Bundesrepublik wird ihr Steuerreformkonzept sowohl von der Wirtschaftspresse als auch von einigen Verbanden und Organisationen wohlwollend bis positiv aufgenommen Auf der anderen Seite ist das Lager der Skeptiker nicht minder prominent besetzt. Verwiesen sei hier nur auf die Beitrage von Schneider oder Homburg. 3

Abgeltungssteuer, duale ESt und zinsbereinigte ESt: Steuerreform aus einem Guss

Das System der Einkommensbesteuerung und dessen grundlegende Umgestaltung sowie die Abstimmung von Einkommens- und Unternehmensbesteuerung stehen seit Jahren im Mittelpunkt des Forschungsinteresses von Franz W. Wagner. Zwar wurden das deutsche Einkommensteuersystem und auch die Korperschaftsteuer sowohl von der fruheren konservativen als auch unter der gegenwartigen rot-grunen Regierung mehrfach reformiert, aber die von Wagner diagnostizierten fundamentalen Mangel blieben dabei weitestgehend unberucksichtigt.

From Theory to Application: A Computable General Equilibrium Model

We are now equipped with some theoretical insights into the welfare effects of value-added taxes in open economies. We know that international income effects as well as domestic and international substitution effects matter and we have elaborated on the determinants of these effects. Theoretical reasoning alone, however, does not tell us much about the quantitative significance of these effects, which are exactly what we are interested in. Which countries realize welfare gains, and which suffer welfare losses, when the EU switches from one international taxation principle to another? Furthermore we want to know whether or not welfare changes are quantitatively significant, and what counts more for welfare changes, international income effects or efficiency considerations due to substitution effects? In Chapter I we argued that computable general equilibrium (CGE) models were the best way of answering these and related questions. Hence, the aim of the present chapter is to develop and describe our computable general equilibrium model in more detail.

Simulation Results and Economic Interpretations

This chapter contains our simulation results and explains them in economic terms. Starting with the data set for 1981, we used the fully specified CGE model from Chapter IV to compute a number of hypothetical (“counterfactual”) equilibria corresponding to different VAT reform options. Using summary statistics, the results are then compared with the original pre-change (“benchmark”) equilibrium. We then try to explain the numerical results in economic terms.

An Introduction to Value-added Taxation

The debate about the use of commodity taxation as a means of protectionism is as old as the taxation of commodities itself. There were plenty of quarrels about the alleged discrimination against foreign goods and the distribution of tax revenues between different regions in medieval Europe. In 1158 a quarrel over the salt tax between bishop Otto of Freising and Henry the Lion resulted in the foundation of the city of Munich. Emperor Friedrich Barbarossa, himself, had to decide on a mutually acceptable distribution of salt-tax revenues, preventing a bloody battle at the very last minute. Elsewhere such tax quarrels were not settled so peacefully. The Alcabala, an early form of a sales tax, which was levied in Spain and its dependencies, infuriated Spain’s trading partners to such an extent that Spanish tax collectors abroad were sometimes killed. Although the battle ground has largely moved to the conference table or the courts, tax discrimination between domestic and foreign goods draws just as much attention today as it did in the Middle Ages.

VAT Policy Options for an Integrated Europe

In this chapter we discuss the VAT policy options that are applicable in an integrated Europe. We distinguish between three broad policy options. The first presupposes that border controls have been abolished but that international tax barriers have been retained as far as possible. The current transitional VAT system, effective since January 1, 1993, operates in this way. Compliance costs aside, the economic effects of the transitional system depend heavily on the tax treatment of cross-border sales to final consumers. Our preferred interpretation is that either the destination or the origin principle be applied to intra-community sales to private persons whatever taxation principle is of mutual advantage for the vendor and the purchaser in different EU member states. We will call this the “switching option”. In contrast to this, the relevant literature seems to assume that all cross-border sales to final consumers are taxed according to the origin principle under the transitional system. According to this interpretation, the current situation is described as a “mixed system”, taxing trade between registered taxpayers by the DP but applying the OP to cross-border sales to non-registered taxpayers.