Original scientific paper

Progressivity of personal income tax in Croatia: decomposition of tax base and rate effects

Ivica Urban

Abstract

This paper presents progressivity breakdowns for Croatian personal income tax (henceforth PIT) in 1997 and 2004. The decompositions reveal how the elements of the system – tax schedule, allowances, deductions and credits – contribute to the achievement of progressivity, over the quantiles of pre-tax income distribution. Through the use of ‘single parameter’ Gini indices, the social decision maker’s (henceforth SDM) relatively more or less favorable inclination toward taxpayers in the lower tails of pre-tax income distribution is accounted for. Simulations are undertaken to show how the introduction of a flat-rate system would affect progressivity.

Keywords

personal income tax; progressivity; decomposition

Hrčak ID:

5967

URI

https://hrcak.srce.hr/5967

Publication date:

1.9.2006.

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