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Type: Journal Articles Authors: Horacio Levy and Magda Mercador-Prats ISSN: Print: 0143-5671; Online: 1475-5890
Published in: Fiscal Studies, Vol. 23, No. 3, September 2002
Volume, issue, pages: Vol. 23, No. 3, pp. 419-443
JEL classification: H24, K34
Press release: Fiscal Studies, September 2002
Governments often try to reduce the complexity of personal income tax systems by decreasing the number of tax filings. The 1998 reform of the Spanish income tax system has followed this approach by adjusting withholding on earned income to the income tax liability. In this paper, we assess to what extent the reform has fulfilled its purposes, making use of a micro-simulation tax- benefit model for Spain, ESPASIM. The number of individuals exempt from filing a tax return has been reduced to around half of the total number of taxpayers. However, the quantity of tax returns sent to the tax administration has not changed so much because the new withholding system adjusts taxes for only 29 per cent of those exempt. Moreover, the new system increases the overall excess of tax withholding by 1.5 billion euro. We also study alternative reforms that could achieve better results than the one implemented. Search |
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