VOLUME XVIII
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AUTUMN 2010
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OBSERVATORY
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THE VAT RISE IN SPAIN: AN ANTICIPATED ASSESSMENT OF ITS EFFECTS
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GONZALO FERNÁNDEZ-DE-CÓRDOBA
JOSÉ L.TORRES Universidad de Málaga |
On September 2009 the Spanish government announced, among other fiscal changes, a rise in the VAT rates to come into effect on 1 July 2010. The lower VAT rate will be increased from 7% to 8%, whereas the general VAT rate with be increased from the currently 16% to 18%. In this paper we study the effects of this fiscal policy on the Spanish economy. We try to answer two important questions. First, we want to quantify the effects of the announced rise in the VAT on the key macroeconomic variables and on total fiscal revenues. Second, we focus on the effects derived from the anticipation of the policy. Calibration of a dynamic general equilibrium for the Spanish economy shows that the announcement of the future VAT increases will generate a rise in consumption in the shortrun, until July 2010, but it also will reduce investment.
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Key words: anticipated fiscal policy, VAT, dynamic general equilibrium model.
JEL Classification: E62, H20, H30. |
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