|
on Accounting and Auditing |
| By: | Pirttälä, Jukka (University of Tampere and the Labour Institute for Economic Research); Selin, Håkan (Uppsala Center for Fiscal Studies) |
| Abstract: | This paper reviews the literature on optimal taxation of labour income and the empirical work on labour supply and the elasticity of taxable income in Sweden. It also presents an overview of Swedish taxation of labour income, offers calculations on the development in effective marginal tax rates and participation tax rates, and estimates, using the difference-in-differences method, the impact of tax incentives on employment rates of elderly workers. After this background, we ponder possibilities for reforming the Swedish tax system to improve its labour market impacts. We suggest better targeting the earned income tax credit at families and low-income workers, lowering the top marginal tax rates, and maintaining the tax incentives for older workers. |
| Keywords: | Optimal taxation; labour income taxation; labour supply; taxable income; Swedish tax system. |
| JEL: | H21 H24 J22 |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2011_002&r=acc |
| By: | David Powell |
| Abstract: | Income taxes distort the relationship between wages and non-taxable amenities. When the marginal tax rate increases, amenities become more valuable as the compensating differential for low-amenity jobs is taxed away. While there is evidence that the provision of amenities responds to taxes, the literature has ignored the consequences for job characteristics which cannot fully-adjust. This paper compares the wage response of dangerous jobs to the wage response of safe jobs. When tax rates increase, we should see the pre-tax compensating differential for on-the-job risk increase. Empirically, this paper finds large differences in the wage response of jobs based on their riskiness. |
| Keywords: | income taxes, value of a statistical life, tax incidence, compensating differentials |
| JEL: | H22 H24 J17 J28 J31 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ran:wpaper:706-1&r=acc |
| By: | Marco Maffezzoli |
| Abstract: | The available empirical evidence suggests that the distribution of income and its composition play an important role in explaining tax noncompliance. We address the issue from a macroeconomic point of view, building a dynamic general equilibrium Bewley model that jointly endogenizes the determinants of tax evasion and income heterogeneity. Our results show that the model can successfully replicate the salient qualitative and quantitative features of the data. In particular, the model replicates fairly well the shape of the cross-sectional distribution of misreporting rates over true income levels. Furthermore, we show that a switch from progressive to proportional taxation has important quantitative effects on noncompliance rates and tax revenues. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:378&r=acc |
| By: | Sandro Brusco (Department of Economics, Stony Brook University); Luca Colombo (Università Cattolica, Milan, Italy); Umberto Galmarini (Università dell’Insubria, Como, Italy) |
| Abstract: | What degree of tax autonomy should be granted to a regional government on a local tax base? Although the regional policy maker aims at maximizing social welfare, her tax policy may be distorted by the lobbying activity of local taxpayers. In this political environment we characterize the conditions under which social welfare can be increased by restricting the set of tax instruments available to the local policy maker, i.e. the degree of local tax autonomy. We show that full tax autonomy is likely to be dominated by minimal tax autonomy when there are many groups of similar size, while the converse occurs when tax bases are asymmetrically distributed. |
| Keywords: | Tax autonomy, lobbying, local public good provision |
| JEL: | D70 H71 H77 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:nys:sunysb:10-01&r=acc |
| By: | Alain de Crombrugghe (University of Namur, Department of Economics); Gregory de Walque (National Bank of Belgium, Research Department; University of Namur) |
| Abstract: | Most transition countries used tax-supported wage norms in the early 1990's, as a part of their market liberalization programs. This paper analyses how a firm-level tax (or subsidy) on deviations from a pre-set wage norm may promote employment by rotating the labor demand curve perceived by the workers' union around the value of the norm. We derive the conditions such that it yields a positive employment effect. We test the effect of the norm on the wages on a sample of Polish firms in 1990 and 1991. The data support the role of the wage norm on the position of the perceived labor demand and the role of the tax rate on its slope. |
| Keywords: | transition economies, labor market, unions, excess wage tax, employment |
| JEL: | H23 J23 J5 P31 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201101-209&r=acc |
| By: | Julien Daubanes; Pierre Lasserre |
| Abstract: | Optimum commodity taxation theory asks how to raise a given amount of tax revenue while minimizing distortions. We reexamine Ramsey’s inverse elasticity rule in presence of Hotelling-type non-renewable natural resources. Under standard assumptions borrowed from the non-renewable-resource-extraction and from the optimum-commodity-taxation literatures, we show that a non-renewable resource should be taxed in priority whatever its demand elasticity and whatever the demand elasticity of regular commodities. It should also be taxed at a higher rate than other commodities having the same demand elasticity and, while the tax on regular commodities should be constant, the resource tax should vary over time. The appropriate taxation rule depends on the government’s revenue needs; the higher these needs, the closer the consumer price to the monopoly price. Reserves are a form of capital and royalties tax its income; our results contradict Chamley’s conclusion that capital should not be taxed at all in the very long run. When reserves to be extracted are responsive to the taxation of extraction, in the absence of any subsidy to reserve discoveries, the optimal tax rate on extraction obeys an inverse elasticity rule almost identical to that of a commodity whose supply is perfectly elastic. As a matter of fact, there is a continuum of optimal combinations of extraction taxes and subsidies. When the government cannot commit, extraction rents are completely expropriated and subsidies are maximum. In general the optimum Ramsey tax not only causes a distortion of the extraction path, as happens when reserves are given, but also distorts the level of reserves developed for extraction. When that distortion is the sole effect of the tax, it is determined by a rule reminiscent of the inverse elasticity rule applying to elastically-supplied commodities. <P>La taxation optimale des biens cherche à lever des revenus fiscaux donnés en minimisant les distorsions. Nous réexaminons la règle de l’élasticité inverse de Ramsey en présence de ressources non-renouvelables à la Hotelling. Sous les hypothèses standard des littératures de l’extraction des ressources non-renouvelables et de la taxation optimale, une ressource non-renouvelable doit être taxée en priorité, quelles que soient l’élasticité de sa demande et l’élasticité de la demande pour les autres biens. Elle doit l’être à un taux plus élevé qu’un autre bien dont la demande est aussi élastique et, contrairement au taux s’appliquant aux biens conventionnels, ce taux doit varier dans le temps. La taxe dépend des besoins en revenus fiscaux; plus ils sont élevés, plus le prix correspondant s’approche du prix de monopole. Les réserves minérales constituent une forme de capital que taxent les royalties; Chamley a montré qu’il est néfaste de taxer le capital à très long terme. Au contraire, même lorsque les réserves à extraire dépendent du traitement fiscal de l’extraction, en l’absence de toute subvention à l’exploration, le taux optimal de la taxe obéit à la même règle d’élasticité inverse que les biens conventionnels dont l’offre est parfaitement élastique. En fait, il y a une infinité de combinaisons optimales de taxes à l’extraction et de subventions à la constitution de réserves. Si le gouvernement n’est pas en mesure de s’engager à s’abstenir de taxer les producteurs, ces derniers sont entièrement expropriés et ce sont des subventions qui doivent financer la constitution de réserves. En général, la taxe optimale de Ramsey cause une distorsion tant sur le profil d’extraction (comme lorsque les réserves sont données) que sur le volume des réserves lorsque celles-ci sont endogènes. Lorsque cette dernière distorsion est le seul effet de la taxe, elle obéit à une règle proche de celle qui s’applique aux biens conventionnels dont l’offre est élastique. |
| Keywords: | Optimum commodity taxation, inverse elasticity rule, non-renewable resources, hotelling resource, supply elasticity, demand elasticity, capital income taxation., Taxation optimale des biens, règle de l’élasticité inverse, ressources non-renouvelables, ressource hotellienne, élasticité de l’offre, élasticité de la demande, taxation du capital. |
| JEL: | Q31 Q38 H21 |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-05&r=acc |
| By: | M. Govinda Rao (National Institute of Public Finance and Policy) |
| Abstract: | The 13th Finance Commission has forayed into a number of areas partly warranted by its terms of reference and partly due to the approach it adopted. The Commission, besides tax devolution, has recommended as many as 12 different types of grants with a plethora of conditionalities. A critical appraisal of the recommendations shows that the transfer system recommended by the Commissions suffers from the same limitations of inequity and perverse incentives as in the past. The inability to offset the fiscal disabilities of the states leads to giving several grants. Even here, the approach is ad hoc. In particular, the grants recommended for individual states for their special needs is a classic example of ad hoc approach which is arbitrary and judgemental. The recommendations relating to the GST are the ones which have been resented most by the states and actually, this has taken the reform agenda backwards. The "all or nothing" types of conditions do not leave much room for a "grand bargain". A major concern is with a plethora of conditionalities imposed by the Commission. Besides the conditions on GST compensations discussed above, there are several conditions stipulated for achieving fiscal consolidation and incentivising local bodies. There are questions on design, implementation, and monitoring of these conditions. These questions leave one suspect that the Commission lost an opportunity to reform the transfer system yet again. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:10/76&r=acc |
| By: | MUNK, Knud J. (Faculté d'ingénierie biologique, agronomique et environnementale, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium) |
| Abstract: | Policy analysis in applied fields such as agricultural, trade, environmental and development policy is still often undertaken within a first-best, rather than a more realistic second-best framework. The present paper seeks to contribute to changing this state of affairs by providing an intuitive explanation of what determines the optimal tax system. It derives and interprets an optimal tax formula for an economy with many goods to explain the optimal tax system as reflecting a trade-off between, on the one hand, the objective of encouraging the supply of labour to the market and, on the other hand, the objective of limiting the distortion of the marginal rate of substitution between produced goods. It illustrates this insight by a quantitative general equilibrium model which does not impose separability between consumption and leisure. The analysis clarifies issues of normalisation and deepens the insight due to Corlett and Hague (1953) that goods should be taxed according to their complementarity with leisure. |
| Keywords: | public economics, optimal taxation, rules of normalisation, quantitative model of optimal taxation, Antonelli elasticity of complementarity |
| JEL: | H2 |
| Date: | 2010–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010042&r=acc |
| By: | Harry X. WU |
| Abstract: | Using a "data fundamentalist approach," this study revisits the long debate about China's growth performance by seriously tackling the existing data problems that have been the major obstacles to a proper assessment of China's growth performance. First, this study examines and adjusts the serious break in the official employment statistics in 1990. Second, it provides an adjustment for the numbers employed by a human capital effect. Third, it tests the sensitivity of Maddison's (1998a) "zero labor productivity growth" assumption in gauging the real growth of the so-called "non-material (including non-market) services." Fourth, it further improves the author's earlier physical output-based production index for the industrial sector (Wu, 2002a) by using multiple weights and time-variant value added ratios obtained from the Chinese input-output tables. The likely problem of "product quality" in such a physical measure is examined and rejected. Fifth, it provides a new set of estimates of capital stock for the aggregate economy using alternative deflators and depreciation rates, crosschecked by the author's industry-level capital stock estimates (Wu, 2008b). This completely new data set is used in a Solow-type growth accounting exercise with different factor income share assumptions. The new results-under the full adjustment scenario for the post-reform period using input-output table income weights-show that the estimated annual TFP growth rate is 0.3 percent, which is substantially lower than the estimate of 3.1 percent derived from the official data without any major adjustment. A range of TFP estimates is also provided for each sub-period under different assumptions. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:11003&r=acc |