ArticlePDF Available

¿Aplica la curva de Laffer al IVA sobre los servicios sanitarios privados? (Does the Laffer Curve Apply to VAT on Private Healthcare Services?)



In October 2020, the Spanish government announced that it was considering eliminating the current VAT exemption for private health services. Can we expect a positive or negative impact of this tax reform on the public deficit? This article presents a model to analyse this fiscal policy and estimates the expected impact using microsimulations. The results indicate that abolishing the VAT exemption and establishing a tax rate of 21% could result in an increase of the public deficit. The amount of this impact largely depends on the elasticity of the transfer of users from private insurance to the National Health Service. For a certain range of elasticities, establishing a reduced VAT rate of 10% may mitigate the negative impact on the deficit. These results are in line with those postulated by the Laffer curve for direct taxation.
A preview of the PDF is not available
ResearchGate has not been able to resolve any citations for this publication.
Full-text available
The proliferation of exempt supplies in VAT systems, particularly the traditional European VAT, undermines the integrity of the tax in many respects. Exempt supplies bear a tax burden equal to the input tax imposed along the supply chain up to the exempt supply. This leads to overtaxation of business customers and undertaxation of final consumers. The neutrality of a benchmark VAT is replaced by economically inefficient biases and distortions. Unclear borderlines between exempt and taxable supplies increase compliance costs and administration costs. This paper reviews the types of exempt supplies that fall into two broad categories -- merit or concessional exemptions such as those for education or health services, designed to reduce taxation to achieve social benefits, and those adopted for technical reasons including exemptions for immovable property and financial supplies. It explains the origins of the exemptions and explores reform options to bring exempt supplies within the ordinary system of taxable supplies with full input tax recovery for businesses.
Full-text available
Australia has a compulsory, tax-financed publicly provided national health insurance scheme (Medicare). This scheme provides cover against the cost of specified medical services provided by approved private medical practitioners, and ensures inpatient treatment is provided to public patients in public hospitals free of charge. This paper provides evidence on the determinants of demand for private health insurance in this setting. Various socioeconomic and health-related factors are included as explanatory variables in the analysis. The own-price elasticity of demand for hospital insurance is estimated to be-0.50, and that for ancillary insurance-0.35. Income elasticities for hospital and ancillary insurance are estimated to be 0.24 and 0.20 respectively. Estimates of elasticities for two subgroups in the population (age <65 and age 65+) are also presented. Evidence is presented that age as a determinant of demand may be serving as a proxy for health status and the price of health insurance.
This article considers the question of whether marginal tax rates (MTRs) in the US income tax system are on the “right” side of their respective Laffer curves. Previous attention has tended to focus specifically on the top MTR. Conceptual expressions for these “revenue-maximizing elasticities of taxable income” (ETI L), based on readily observable tax parameters, are presented for each tax rate in a multi-rate income tax system. Applying these to the US income tax, with its complex effective marginal rate structure, demonstrates that a wide range of revenue-maximizing ETI values can be expected within, and across, tax brackets and for all taxpayers in aggregate. For some significant groups of taxpayers, these revenue-maximizing ETIs appear to be within the range of empirically estimated elasticities.
We investigate two determinants of the price sensitivity of health plan demand: the size of the choice set and the salience of premium differences. Using variation in both features in the German Social Health Insurance (SHI) and information on health plan switches of retirees in the German Socio Economic Panel, augmented with information on individuals’ choice sets we find that retirees react less to potential savings from switching when they have more plans to choose from and when differences between premiums are less salient. Simplifying choices could save consumers money and improve the functioning of the health insurance market.