Resumen de Inequality effects of inflation: the Spanish income tax system between 1999 and 2003 and the 2003 reform

Amadeo Fuenmayor Fernández, Rafael Granell Pérez, Francisco José Higón Tamarit, Juan Alberto Sanchis Llopis

• The aim of this research is to analyse how inflation induced erosions of the nominally defined items of the tax rules of the Spanish income tax system, and how that may change distributional and revenue generating properties of income taxes. We further investigate the effects of the tax reform carried out in 2003. Although the Spanish government claimed that this reform would reduce tax liabilities, this is not so clear as many argue that this reform only offset the effects of inflation suffered by the population since 1999. Using the European Community Household Panel (ECHP) data set we aim to shed some light on the above issues through microsimulation techniques.

  Furthermore, we will also measure the inequality effects caused by the fact that the Spanish tax system does not automatically adjust the main fiscal elements to account for inflation.