Abstract:

In this paper we carry out a microsimulation exercise to analyse regional policy in personal income tax, using the IRPF 2002 IEF-AEAT sample. So far, the Autonomous Communities have used deductions as the main instrument to modify personal income tax. However, it seems that regional deductions entail high design, legislative and administrative costs, while their benefits have little impact on few taxpayers. Our hypothesis is that a similar result can be achieved with lower costs. To this end, we have considered two alternatives, which are undoubtedly simpler: a slight reduction in the tax rates of the regional tariffs, and a general deduction to be introduced by each Autonomous Community.

Reference:

Fuenmayor, A.; Granell, R.; Higón, F.J. (2009): Las deducciones autonómicas en el IRPF: Análisis y alternativas, Revista de Estudios Regionales, 86, pp. 209-236.