1. Figure 3b: Typical Joint Distribution in Micro-Data

2. Fig 3a: The Density of Log Consumption: FES

3. Fig 3c: Shape Invariant Engel Curve: Food Share

4. Fig 3d: Shape Invariant Engel Curve: Alcohol Share

5. Figure 10a: US Gasoline Demand: Conditional Mean for Upper Quartile of Income Blundell, Horowitz and Parey (2008)

6. Figure 10a: US Gasoline Demand: Conditional Mean for Median Income Blundell, Horowitz and Parey (2008)

7. Figure 10a: US Gasoline Demand: Conditional Mean for 25% Income Blundell, Horowitz and Parey (2008)

8. Figure 8c: DWL as a % of Tax Paid Price ChangeIncomeDWL (as % of tax paid) unconstrainedconstrainedlog-log $1.22 - $1.27 $72,5004.20 %3.27 %1.80 % $57,5003.08 %4.50 %1.80 % $42,500-1.33 %0.72 %1.79 % $1.32 - $1.37$72,500-3.02 %0.49 %1.67 % $57,5002.61 %2.07 %1.66 % $42,500-2.23 %0.77 %1.66 % Blundell, Horowitz and Parey (2008)

9. Figure 13a Median Gasoline Demand at Median Income Blundell, Horowitz and Parey (2009)

10. Figure 13b Median Gasoline Demand at 75% Income Blundell, Horowitz and Parey (2009)

11. Figure 13d Gasoline Demand Quantiles at Median Income Blundell, Horowitz and Parey (2009)

12. Figure 13e Gasoline Demand Quantiles at Median Income Blundell, Horowitz and Parey (2009)

13. Figure 8a: Distance as an Instrument for Gasoline Price

14. Figure 8b: Nonparametric Exogeneity Test, By Income income categoryobs. test stat. critical value alpha=0.05 rejection alpha=0.05 critical value alpha=0.1 rejection alpha=0.1 25%235 0.039 0.645No 0.471No 50%4320.2980.491No0.357No 75%194 0.065 0.293No 0.221No Notes: Cross-validation of bandwidth to estimate f XW results in h XW = 0.27. Bandwidth to estimate f X is chosen as h X = n^(1/5 - 7/24)*h_XW (as in Blundell & Horowitz 2007, Section 4). Blundell, Horowitz and Parey (2008)

15. Zero-rated: Food Construction of new dwellings Domestic passenger transport International passenger transport Books, newspapers and magazines Children’s clothing Drugs and medicines on prescription Vehicles and other supplies to people with disabilities Cycle helmets Reduced-rated: Domestic fuel and power Contraceptives Children’s car seats Smoking cessation products Residential conversions and renovations VAT-exempt: Rent on domestic dwellings Rent on commercial properties Private education Health services Postal services Burial and cremation Finance and insurance Estimated cost (£m) 11,300 8,200 2,500 150 1,700 1,350 350 10 2,950 10 5 10 150 3,500 200 300 900 200 100 4,500 Indirect Taxation – UK case

16. Bread and CerealsNegative Meat and FishNegative Dairy productsNegative Tea and coffeeNegative Fruit and vegetablesNegative Food eaten outPositive BeerPositive Wine and spiritsPositive Domestic fuelsNegative Household goods and servicesPositive Adult clothingPositive Childrens’ clothingNegative Petrol and dieselPositive Leisure goods and servicesPositive Impact on budget share of an additional hour worked Conditional on income and prices Source: QUAIDS on UK FES, MR1

17. Effect of base broadening reform with earnings tax reform compensation, by expenditure decile

18. Effect of base broadening reform with earnings tax instruments as compensation (MR II ), by income decile

19. Reform revenue neutral and designed to leave effective tax rates on earnings unchanged EMTR: before and after indirect tax reform

20. Reform revenue neutral and designed to leave effective tax rates on earnings unchanged PTR: before and after indirect tax reform

21. Welfare gains - Distribution of EV/x by ln(x) Source: MR II ln x