Redistribution within the tax-benefits system in Austria

Abstract

The aim of this study is to analyze redistribution within the Austrian tax-benefits system. In this work, we take a comprehensive view and include not only direct taxation and cash benefits but also indirect taxes and in-kind transfers. We look at two kinds of redistribution: between households belonging to different income groups, and between generations, taking a life-cycle perspective. Our analysis shows that indirect taxes (as understood in previous literature) have a regressive effect on the tax-benefits system. In contrast, in-kind benefits seem to have a progressive effect. To analyze the impact of both, we extend our income concept to include both indirect taxes and in-kind benefits. If we look at the distributional impact, we find that the inequality-enhancing effect of indirect taxes is more than offset by the inequality-reducing effect of in-kind benefits. The Gini coefficient increases from 0.24 to 0.26 due to indirect taxes, but when adding in-kind benefits, the Gini coefficient is reduced to 0.23. The overall effect of both indirect taxes and in-kind benefits is progressive.