The PROVIDE Project Standard Computable General Equilibrium ...

PROVIDE Project Technical Paper 2003: 3 October 2003
c
( * * * * )
ETAX = ∑ TEADJ te PWE ER QE . (F2)
c c c
Finally the revenue from sales taxes (STAX) is defined (F2) as the sum of the product of sales
tax rates (ts) and the value of domestic expenditure on commodities, i.e.,
STAX
⎛TSADJ * tsc
* PQSc
*
⎞
= ∑⎜ ⎟
c c c c c c c ⎠. (F3)
=
∑
c
⎝( QINTD + QCD + QENTD + QGD + QINVD + dstocconst )
( TSADJ * ts * PQS * QQ )
c c c
There is a single tax on production (ITAX). As with other taxes this is defined (F4) as the
sum of the product of indirect tax rates (tx) and the value of output by each activity evaluated
in terms of the activity prices (PX), i.e.,
a
( * * * )
ITAX = ∑ TXADJ tx PX QX . (F4)
a a a
These are the tax instruments most likely to yield negative revenues through the existence of
production subsidies.
The tax on factors (FTAX) is defined (F5) as the product of factor tax rates (tf) and factor
incomes for all factors,
f
( * *( ))
f f f
FTAX = ∑ TFADJ tf YF −deprec
. (F5)
Finally, the revenue from direct taxes (DTAX) is defined (F6) as the sum of the product of
household income tax rates (ty) and household incomes plus the product of the direct tax rate
for enterprises (tye) and enterprise income,
∑ ( *
h* h) ( * * ). (F6)
DTAX = TYADJ ty YH + TYEADJ tye YE
h
3.7. Market Clearing Block Equations
The market clearing equations ensure the simultaneous clearing of all markets. In this model
there are six relevant markets: factor and commodity markets and enterprise, government,
capital and rest of world accounts. Market clearing with respect to activities has effectively
been achieved by (X4), wherein the supply and demand for domestically produced
commodities was enforced, while the demand system and the specification of expenditure
relationships ensures that the household markets are cleared.
Adopting an initial assumption of full employment, which the model closure rules will
demonstrate can be easily relaxed, amounts to requiring that the factor market is cleared by
equating factor demands and factor supplies (M1) for all factors
© S. McDonald
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