which are the figures we usually observe, should be removed, since the existing tax is being replaced.As domestic expenditures paid by the final consumers are usually expressed in purchaser prices, the total spending by commodity includes the prices of goods and sales taxes imposed by the existing tax system. The tax may be separated in two components. The first is the direct tax that is imposed at the manufacturer’s level, but it is shifted directly to final consumers without further processing. The tax may be shown explicitly in published form and, if not, it can be estimated by commodity from the final demand matrix. In any event, we have to remove the current sales taxes included in the personal and government expenditures contained in the I-O tables.To estimate this direct sales tax, one has to first estimate the current sales tax base by commodity. This is accomplished by removing the retail trade margins (column 4 of Table 8.4) and wholesale trade margins (column 5 of Table 8.4) from purchasers’ expenditures on each good or service.42The current sales tax base by commodity i (column 9 of Table 8.4) can be calculated as follows:[( ) ( ) ( )] iiiiiiwmrmEBρα+⋅+⋅+=111 (8-1)where Bi = The sales tax base exclusive of the tax for commodity i (Column 9)Ei = Expenditure on commodity i at retail price (column 3);rmi = Retail margin for commodity i (column 4);wmi = Wholesale margin for commodity i (column 5);αi= Taxable proportion for commodity i
(
column 6);
ρ i = Sales tax rate for commodity i (column 7).
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