Impact of Tax Reform on Mortgage Market: A Case Study on Tax Incidence, Ejercicios de Economía Política

¡Descarga Impact of Tax Reform on Mortgage Market: A Case Study on Tax Incidence y más Ejercicios en PDF de Economía Política solo en Docsity! ASSESSABLE EXERCISE 1 ARIADNA MARTÍNEZ ROCAMORA Case study: Tax incidence Un#l 2018, the Regula#on of the Tax on Patrimonial Transmissions and Documented Legal Acts, according to the provision of ar#cle 68 number 2 of Real Decreto 828/1995, de 29 de mayo, por el que se aprueba el Reglamento del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados, established that, in the case of mortgage deeds, the taxable person was the borrower. The aforemen#oned regula#on was amended by Real Decreto-ley 17/2018, de 8 de noviembre, por el que se modifica el Texto refundido de la Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados, aprobado por el Real Decreto Legisla#vo 1/1993, de 24 de sep#embre, so that, since then, in the case of mortgage deeds, the taxpayer is the lender -banks- instead of the borrower. The tax rate was no modified. Analyse, using graphs, the effects on the mortgage market due to the new Tax regula:on (ITPAJD) Price p2 p1 q2 q1 Quan:ty 1. How is the supply and demand for mortgages changing? First of all, supply is going to change as banks who offer the mortgage now have to pay the tax. The supply is shiVed up by the amount of the tax they now have to pay. However, if demand is inelas#c, borrowers are not very responsive to price changes and the quan#ty remains constant when the tax has been introduced. But, demand could also increase and be elas#c because now, borrowers do not have to pay the tax, however the price will increase and in an in direc#ve form they will be paying it. 2. What about the interest rate and the volume of loans? The interest rate is going to increase as it it considered the price that borrowers are going to pay. The volume of loans, will keep the same or it might also increase as consumers do not have to pay the tax but they will pay a higher interest so the volume of loans will Demand Supply Supply+ tax