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Excess Wages Tax
Author:
Mr. S. Nuri Erbas
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Mr. Alan A. Tait null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1995: Issue 017
Language:
English
Publication Date:
01 Feb 1995
DOI:
https://doi.org/10.5089/9781451843484.001
ISBN:
9781451843484
ISSN:
1018-5941
Pages:
50
Keywords:
WP; minimum wage; wage bill; wage award; regulation scheme; monopsonist enterprise case; enterprise profits; wage growth; Wages; Minimum wages; Wage adjustments; Corporate income tax; Eastern Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Excess wages tax (EWT) is a tax-based incomes policy instrument introduced in many centrally-planned economies and still used in some FSU and Eastern European countries in transition. The main macroeconomic goal of EWT is to curb inflationary pressures by penalizing through taxation the “excessive” wage awards granted by enterprises in the course of wage and price liberalization. In this paper, effects of EWT on the behavior of a profit-maximizing enterprise under monopsony, its incidence on wages and profits, and its impact on inflation are analyzed. The effect of EWT on an enterprise that maximizes workers’ income is also examined with some observations on EWT’s impact on managerial behavior. Finally, recent experience with EWT is assessed and compared to that suggested by the model.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund