BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 10/2003:
Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act
Michael Funke ()
and Holger Strulik ()
Abstract: This paper analyses the long-run effects of Estonia’s 2000
Income Tax Act with a dynamic general equilibrium model. Specifically, we
consider the impact of the shift from an imputation system to one where
companies only pay taxes on distributed profits. Balanced growth paths,
transitional dynamics and welfare costs are computed. Our results indicate
that the 2000 Income Tax Act leads to higher per capita income and
investment, but lower welfare. A sensitivity analysis shows the results are
rather robust.
Keywords: growth; welfare; taxation; tax reform; Estonia; (follow links to similar papers)
JEL-Codes: H25; H32; O41; O52; (follow links to similar papers)
26 pages, August 26, 2003
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