CEU Electronic Theses and Dissertations, 2011
| Author | Gunthner, Timea Krisztina |
|---|---|
| Title | THE EFFECTS OF THE ROMANIAN FLAT TAX REFORM ON TAXABLE INCOME AND HOUSEHOLD CONSUMPTION |
| Summary | Following the example of a number of Eastern European countries, Romania adopted a highly disputed flat tax rate system in 2005, stipulating a radical cut in personal income taxes. The aim of this study is to evaluate taxpayer’s behavioral responses triggered by this substantial fiscal relaxation. For this purpose I estimate the taxable income and consumption elasticity employing a diff-in-diff methodology on the cross-sectional dataset of the Romanian Household Budget Survey for the period 2003-2007. My findings reveal that the taxable income of the group experiencing large tax rate cut declined relative to those facing a lower tax cut. The elasticity estimate for the full sample of employees is about -0.26 while for the sample restricted to employees in the private sector is substantially larger negative. This result might be due to a strong income effect or to the employer’s response to the tax cut. The estimates for consumption are not significant, implying that if there was any positive effect of the reform on consumption, it was not differentially larger in the income groups experiencing larger tax cut. |
| Supervisor | Benczúr Péter |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2011/gunthner_timea.pdf |
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