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on Accounting and Auditing |
| By: | Paulus A (Institute for Social & Economic Research); |
| Abstract: | The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes. |
| Keywords: | Flat tax reform, income distribution, work incentives, microsimulation |
| JEL: | C81 D31 H24 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em2/08&r=acc |
| By: | Overesch, Michael; Voeller, Dennis |
| Abstract: | This paper empirically analyses whether both personal and corporate taxation have an impact on companies' capital structure decisions. We investigate the effect of the difference in taxation of debt and equity financing on capital structures. Our empirical results, based on a comprehensive panel of European firm-level data, suggest that a higher tax benefit of debt has the expected significant positive impact on a company's financial leverage. Particularly, we find evidence that the capital structures of smaller companies respond more heavily to changes in the tax benefit of debt. Additional analysis confirms that not only corporate taxes are relevant for corporate financial planning, but variation in capital income tax rates at the shareholder level implicates significant capital structure adjustments as well. Moreover, we find substitutive relationships between non-debt tax shields and the effect of the corporate tax rate on capital structures. |
| Keywords: | Capital Structure, Corporate Income Tax, Personal Income Tax, Firm-Level Data |
| JEL: | G30 G32 H24 H25 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7229&r=acc |
| By: | Lucas Ferrero; Leandro M. de Magalhaes |
| Abstract: | A political regime has budgetary separation of powers if the power with the prerogative to raise taxes is not the full residual claimant of a tax increase. In the American states two conditions are needed: the governor must have the line item veto, and the political interests of the legislative majority and the governor must not be perfectly aligned. Political alignment between the executive and the legislative depends on the numbers of seats the governor's party controls in the state legislature; it changes discontinuously as we move from a unifed to a divided government. We use regression discontinuity design to establish a causal relation between a divided government and lower tax rates in states with line item veto. In states with block veto such relation is not present. We estimate the jump in the tax level at the discontinuity semiparametrically. |
| Keywords: | Separation of powers, line item veto, tax level, regression discontinuity, semiparametric. |
| JEL: | H00 H11 H20 H30 H71 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:08/6032&r=acc |
| By: | Alejandro Cuñat; Szabolcs Deak; Marco Maffezzoli |
| Abstract: | A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly - or, depending on parameter values, even completely - offset by growth in the long-run, due to the resulting incentives to further accumulate capital. We study how the dynamic response of government revenue to a tax cut changes if we allow a Ramsey economy to engage in international trade: the open economy's ability to reallocate resources between labor-intensive and capital-intensive industries reduces the negative effect of factor accumulation on factor returns, thus encouraging the economy to accumulate more than it would do under autarky. We explore the quantitative implications of this intuition for the US in terms of two issues recently treated in the literature: dynamic scoring and the Laffer curve. Our results demonstrate the internaional trade enhances the response of government revenue to tax cuts by a relevant amount. In our benchmark calibration, a reduction in the capital-income tax rate has virtually no effect on government revenue in steady state. |
| Keywords: | international trade, Heckscher-Ohlin, dynamic macroeconomics, taxation, revenue estimation, Laffer curve |
| JEL: | E13 E60 F11 F43 H20 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0860&r=acc |
| By: | Baldwin, Richard; Okubo, Toshihiro |
| Abstract: | We model international tax competition allowing for agglomeration forces and heterogeneous firms. This provides a new perspective since a tax schedules have different effects on the international relocation decision of small and large firms (large firms are endogenously more sensitive to tax competition) and these decisions affect industry productivity in addition to the usual effects. The model allows us to study rate-lowering base-widening reforms. We show it is generally possible to design such a reforms that raises revenue without losing firms. |
| Keywords: | agglomeration; heterogeneous firms; tax reform |
| JEL: | H32 P16 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6843&r=acc |