The Revenue Elasticity of Taxes in the UK

Melbourne Institute Working Paper No. 11/01

Date: November 2001


John Creedy
Norman Gemmell


This paper provides new estimates of the revenue elasticity of income taxes in the UK over the period 1989-2000. It shows that changes in fiscal structure, including changes to income-related deductions, substantially a.ect these elasticities. Using new analytical expressions, estimates of consumption tax revenue elasticities for VAT and the main UK excises are also obtained. Changes in consumption patterns over time are found to be important for the magnitude of these consumption tax elasticities. A particular merit of the approach used here is that elasticity estimates can be obtained from information on relatively few parameters, almost all of which are available from published sources.

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