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on Public Economics |
| By: | Mark Gersovitz |
| Abstract: | Tax laws and administrations often treat different size firms differently. There is, however, little research on the consequences. As modeled here, oligopolists with different efficiencies determine the size distribution of firms. A government that maximizes a weighted sum of consumer surplus, profits, and tax receipts can tax firms with different efficiencies differently and provides a reference point for other, more restricted differential tax systems. Taxes include a specific sales tax, an ad valorem sales tax, and a profits tax with imperfect deductibility of capital cost, and a combination of the last two. In general there is a pattern of tax rates by efficiency of firm. It is heavily dependent on the social valuation of tax receipts. Analytic and simulation results are provided. When both ad valorem taxes and the imperfect profits tax are combined, simulations suggest that the former rate is higher and the latter rate is lower for relatively inefficient firms. |
| Keywords: | Optimal tax , size distribution , imperfect competition , Taxation , Profits , Tax rates , Economic models , |
| Date: | 2006–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/271&r=pbe |
| By: | Alexander Klemm |
| Abstract: | This paper provides an overview of full and partial allowance for corporate equity (ACE) tax systems in practice. In the recent past, ACE systems have been used in Austria, Croatia, and Italy. Brazil still applies a variant of such a system and Belgium introduced one this year. This paper summarizes the empirical literature on past ACE systems, and provides a theoretical and empirical assessment of the Brazilian ACE variant. The main finding is that the Brazilian reform introduced an ACE system for a minority of firms only, with the majority instead having a system of dividend deductibility. Despite the reduction in the tax preference for debt finance, capital structures have not changed much, but dividends have increased. Investment appears to have benefited from the reform, although the extent to which this was due to the new structure rather than the tax cut is unclear. |
| Keywords: | ACE , tax reform , corporate income tax , Tax systems , Tax reforms , Income taxes , Profits , |
| Date: | 2006–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/259&r=pbe |
| By: | Xavier Debrun; Theo Thomas; Taline Koranchelian; Isabell Adenauer; Peter S. Heller; Menachem Katz |
| Abstract: | Debt relief and the scaling up of aid to low-income countries should allow for greater fiscal space for expenditure programs to create long-term growth and lower poverty rates. But designing a suitable medium-term fiscal framework that fosters a sustainable delivery of better public services and infrastructure while maintaining a credible commitment to fiscal prudence confronts many challenges. This paper discusses what low-income countries can do to shape fiscal policy frameworks that are ambitious in trying to absorb additional aid while still ensuring longer-term sustainability for government expenditure programs and finances. It suggests what approaches can be used to manage the greater fiscal policy risks associated with a scaled-up aid environment, including coordination with monetary policy. The paper also discusses what institutional changes are needed if donors and countries are to facilitate the implementation of a higher level of aid-financed spending programs. |
| Keywords: | Aid , fiscal policy , low-income countries , macroeconomic policy , public financial management , Economic assistance , Fiscal policy , Low income developing countries , Economic policy , Public finance , |
| Date: | 2006–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/270&r=pbe |
| By: | Celine Rochon; Andrew Feltenstein |
| Abstract: | In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and banks failures are generated through increases in the growth rate of the labor force, a revaluation of the exchange rate or an increase in debt issue to finance the government deficit, as compared to a benchmark scenario in which banks remain solvent. Thus bank failures can result from what might seem to be either beneficial economic trends, or correct monetary and fiscal policies. We introduce fiscal policies that modify relative factor prices by lowering the capital tax rate and increasing the tax rate on labor. Such policies can prevent banking failures by raising the return to capital. It is shown that such fiscal policies are, in the short run, welfare reducing. |
| Keywords: | Banking failures , fiscal policies , Banking , China , Fiscal policy , Tax rates , Labor markets , Foreign investment , Economic models , |
| Date: | 2006–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/263&r=pbe |
| By: | Fredrik Carlsen (Department of Economics, Norwegian University of Science and Technology) |
| Abstract: | The paper presents an empirical test of local fiscal competition in Norway based on the observation that interregional migration during the business cycle creates very different incentives for rural and urban municipalities to influence population movements. Panel-data evidence is presented suggesting that municipalities indeed attempt to control population flows. The sensitivity of municipal spending and revenue decisions to population movements varies between municipalities in a way that is consistent with the municipalities' incentives to influence location decisions of households. |
| Keywords: | Fiscal competition; Local government |
| JEL: | H73 R51 |
| Date: | 2006–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:nst:samfok:8006&r=pbe |
| By: | Daniel Kanda |
| Abstract: | This paper develops and estimates a model of the trade balance of Bosnia and Herzegovina. Credit flows and the fiscal stance are found to play a significant role in determining the trade balance. On this basis the paper discusses the trade-offs between monetary and fiscal policy settings needed to achieve a clear downward path for the large current account deficit of Bosnia and Herzegovina. |
| Keywords: | Fiscal , monetary , credit , trade balance , |
| Date: | 2006–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/276&r=pbe |