|
on Public Economics |
| By: | Jiao Li (Department of Economics, University of Sheffield, UK); Duccio Gamannossi Degl’Innocenti (Department of Economics and Finance, Universit`a Cattolica del Sacro Cuore, Via Necchi 5, 20123, Milan, Italy and Tax Administration Research Centre, University of Exeter, Exeter, UK); Matthew D. Rablen (Department of Economics, University of Sheffield, UK) |
| Abstract: | Recent years have witnessed the growth of mass-marketed tax avoidance schemes aimed at the middle (not top) of the income distribution, with significant implications for tax revenue. We examine the consequences, for the structure of income tax, and for tax authority anti-avoidance efforts, of tax avoidance of this type. In a model that allows for both demand- and supply-side considerations, we find that (1) there is an endogenous threshold income below which taxpayers do not avoid, and above which they avoid maximally; (2) the per-dollar price of tax avoidance is decreasing in income under progressive taxation; (3) endogenous adjustments in the price of avoidance make supply less responsive to anti-avoidance activity than thought previously; and (4) that avoidance may drive a non-monotone (Laffer) relationship between tax rates and tax revenue. The findings suggest that new approaches to anti-avoidance, beyond legal enforcement, may be needed. |
| Keywords: | Tax avoidance; Marketed avoidance schemes; Progressive taxation; Anti- avoidance |
| JEL: | H26 D85 K42 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2021010&r= |
| By: | Frédéric Dufourt (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Lisa Kerdelhué (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Océane Piétri (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We revisit the canonical policy of eliminating capital taxation by increasing labor taxation in a endogenous-labor, heterogeneous-agent model with income and wealth heterogeneity, when the government is subject to a strict (per-period) balancedbudget constraint. By contrast with its non-budget neutral equivalent-associated with a constant tax rate over time and a permanent increase in the level of public debt-we show that the obtained endogenous path for the labor tax rate is sharply increasing in the initial period and decreasing over time. The policy then generates a deeper recession in the short-run and a greater expansion in the long-run, as well as a smaller decline in wealth inequality associated with a reduced incentive to save for precautionary motives. Overall, the policy still generates significant losses in average welfare. |
| Keywords: | Fiscal Policy,Capital Tax Cut,Tax Composition,Heterogeneous Agents,Wealth Redistribution |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03424147&r= |
| By: | António Afonso; Ana Venâncio |
| Abstract: | We investigate the effect on municipality spending efficiency of a local property tax reform, which reduced in 2008 the upper limit of the property tax. We compute municipality efficiency scores via data Envelopment Analysis (DEA) from 2005 to 2011, and then we rely in a panel data set to estimate how the tax reform affected the efficiency scores. Results of the analysis show that average input efficiency scores declined from 0.575 before the tax reform to 0.488 after the tax reform. This change was transversal to municipalities that reduced the municipal property tax (IMI) and to the ones that maintained the tax rate. In addition, the IMI reform is linked to higher efficiency scores. In other words, the reduction in efficiency ends up being smaller for the municipalities that decreased the IMI tax rate. |
| Keywords: | public spending efficiency, local government, data envelopment analyis (DEA), local property tax reform. |
| JEL: | C14 C23 H11 H21 H50 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp02102022&r= |
| By: | Oliwia Komada (Group for Research in Applied Economics (GRAPE)) |
| Abstract: | What are the welfare and macroeconomic effects of family policies and how do they depend on policy composition? I answer those questions in overlapping generations model calibrated to the US. I account for the idiosyncratic income risk, redistribution via social security, and tax and benefit system. I explicitly model child-related tax credit, child care subsidies, and child allowance. I show the expansion of the family policy yields higher welfare. The expenditure on the optimal policy accounts for approximately 3% of GDP. Even though the optimal family policy is three times bigger than the status quo policy, taxes decrease when the optimal policy is implemented. Therefore, reform is self-financing. The structure of family policy is crucial for welfare evaluation. Tax credit and child allowance generate higher welfare gains than child care. |
| Keywords: | family policy, pension system, welfare, income instability |
| JEL: | D21 E62 H31 H55 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:fme:wpaper:62&r= |
| By: | Thierry Madiès; Emmanuelle Taugourdeau (Centre de Recherche en Économie et STatistique (CREST)) |
| Abstract: | Our paper presents a model of decentralized leadership with fiscal equalization and imperfect economic integration. The degree of trade integration (reflected by trade costs) turns out to have an effect on both the state tax rates and the ex-post vertical equalization transfers. Our main results are the following: Ex post vertical transfers are welfare deteriorating for low levels of trade integration while they are welfare improving compared to tax competition when trade integration is high enough. However, when public goods are highly valued by the citizens of the federation, ex post transfers are always welfare enhancing. |
| Keywords: | Decentralized Leadership,Tax competition,Trade Integration |
| Date: | 2020–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02023908&r= |
| By: | Morten Støstad (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Frank Cowell (LSE - London School of Economics and Political Science) |
| Abstract: | This paper proposes to treat income inequality as an economic externality in order to in troduce the societal effects of inequality into welfarist models. We introduce such effects in a simple and generalizable welfarist framework and show that they can have sizeable optimal policy consequences that cannot be captured by standard risk aversion or social welfare weights. Novel policy implications are illustrated through the classical optimal non-linear income taxation model, where the social planner must face a trade-off between collecting revenue and changing income inequality levels. Resulting policy consequences are disproportionately located at the top, where optimal marginal tax rates are strongly and robustly dependent on the magnitude of the inequality externality. We use several real-world examples to show that tax policy previ ously unsupported by optimal taxation theory can be explained in our framework. The findings indicate that the magnitude of the inequality externality could be considered a crucial economic variable. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03495989&r= |
| By: | Axelle Ferriere (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Philipp Grubener (Goethe-University - Goethe-Universität Frankfurt am Main); Gaston Navarro (Federal Reserve Board); Oliko Vardishvili (Yale University [New Haven]) |
| Abstract: | We study the optimal joint design of targeted transfers and progressive income taxes. We develop a simple analytical model and demonstrate an optimally negative relation between transfers and income-tax progressivity, due to both efficiency and redistribution concerns. That is, higher transfers should be financed with lower income-tax progressivity. We next quantify the optimal fiscal plan in a rich dynamic model calibrated to the U.S. economy. Transfers should be generous and financed with moderate income-tax progressivity. To redistribute while preserving efficiency, average tax-and-transfer rates should be more progressive than marginal rates. Transfers, even if lump-sum, precisely allow to disentangle average from marginal rates. Targeted transfers further implement non-monotonic marginal rates, but generate only modest additional gains relative to a lump-sum transfer. Quantitatively, the left tail of the income distribution determines the optimal size of the transfer, while the right tail drives the optimal income-tax progressivity. |
| Keywords: | Fiscal Policy,Optimal Taxation,Redistribution,Heterogeneous Agents |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03466762&r= |
| By: | Bibek Adhikari (Illinois State University); James Alm (Tulane University); Brett Collins (Internal Revenue Service); Michael Sebastiani (Internal Revenue Service); Eleanor Wilking (Cornell School of Law) |
| Abstract: | This paper uses confidential tax returns data from sole proprietor businesses to estimate behavioral responses to the introduction of Form 1099-K, a third-party income reporting law that requires credit and debit card companies to report to the Internal Revenue Service gross of payment transactions that businesses receive through their payment systems. We estimate the causal impact of Form 1099-K on business reporting by exploiting a natural experiment in which some cities in the U.S. passed ordinances requiring taxicabs to install credit card readers in their vehicles, while other cities did not pass such ordinances, creating plausibly exogenous variation in the share of receipts reported on Form 1099-K. We find that taxpayers respond to third-party information reporting in offsetting ways. In particular, we find that businesses from cities with mandatory credit card in taxicab ordinances reported more receipts after the introduction of Form 1099-K compared to similar businesses from cities without mandatory credit card in taxicab ordinances, but they also reported an increase in expenses of similar magnitude. On net, third-party information reporting led to small and statistically insignificant changes in taxable income, profit, and tax liability. These results are robust to a variety of alternative specifications and placebo tests. |
| Keywords: | Income reporting, Tax enforcement, Tax compliance, Taxi industry, Sole proprietors |
| JEL: | H25 H26 H32 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2117&r= |
| By: | Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.); Ramon Marimon (European University Institute, UPF - Barcelona GSE, CEPR and NBER.); Joao Brogueira de Sousa (Nova School of Business and Economics.) |
| Abstract: | With ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades, threatening the sustainability of these systems. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform – measured by average social welfare in the economy – existing pay-as-you go systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing steady-state economies after the ongoing demographic transition under these different pension systems and by showing how a front-loaded transition from the PAYG to the BP system, ahead of the ‘ageing transition’, can be Pareto improving (i.e. without losers), while minimizing the cost of the reform. |
| Keywords: | Social security reform, Ageing, Taxation. |
| JEL: | C68 H55 J26 |
| Date: | 2021–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:21/15&r= |
| By: | Luis Carranza Ugarte (Universidad San Martin de Porres.); Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.); Jose Enrique Galdon-Sanchez (Universidad Publica de Navarra.) |
| Abstract: | The Covid 19 pandemic has caused both a decrease in tax revenues and an increase in public spending, forcing governments to increase fiscal deficits to unprecedented levels. Given these circumstances, it is foreseeable that fiscal rules will play a predominant role in the design of many countries’ recovery policies. We develop a general equilibrium, overlapping generations model for a small, open economy in order to study the impact of several fiscal rules upon welfare, public expenditures and growth. We calibrate the model to the Peruvian economy. In this economy, fiscal rules have been widely used and, unlike in other Latin American countries, they have been relatively successful. We find that fiscal rules will generate better results in terms of output and welfare if, in addition to maintaining control over the fiscal result, they also eliminate the bias in favor of current expenditure. We also find that the performance of economies that implement structural rules tends to be better than the performance of economies that implement rules based on current results. |
| Keywords: | Fiscal policy, Infrastructure, Public spending, Public Deficit, Debt limits. |
| JEL: | E62 H54 O23 |
| Date: | 2021–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:21/14&r= |
| By: | Mario Mansour; Mr. Philippe Wingender; Patrick Petit |
| Abstract: | Fighting the obesity epidemic4 has so far proven a difficult challenge, given the diversity of natural and processed foods, the complexity of food supply chains, and the fact that targeting excessive caloric consumption is far trickier than reducing overall consumption (as for tobacco). Nevertheless, efforts to curb caloric intake are gearing up and the experience from tobacco control has drawn much attention on a potential role for excise taxes in fighting obesity. Many related questions have therefore been raised as part of the IMF’s capacity development work: Should excises on unhealthy food be used to fight obesity? If so, under what conditions? What are the product and market characteristics that would help identify the relevant tax bases and the rates at which to tax them? While acknowledging that the scientific evidence keeps evolving, this note summarizes the ongoing debate and practice on food excises and on their potential role as a policy tool to fight the obesity epidemic, with a view to assist policymakers in deciding whether to go forward, and if so, how.How to Apply Excise Taxes to Fight Obesity |
| Keywords: | health, obesity, excise taxes |
| Date: | 2021–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfhtn:2021/008&r= |
| By: | van den Boogaard, Vanessa; Prichard, Wilson; Beach, Rachel; Mohiuddin, Fariya |
| Abstract: | Motivation While there is increasing evidence that taxation can contribute to greater government responsiveness and accountability, such positive outcomes are not guaranteed. If the environment does not enable tax bargaining, there is a risk that taxation will amount to little more than enforced extraction. Purpose We consider how such enabling environments may be fostered and identify specific strategies that governments, civil society actors, and donors can adopt to strengthen the links between taxation, responsiveness, and accountability. Methods and approach We undertake two case studies of tax transparency and taxpayer engagement in Ghana and Sierra Leone, making use of data from taxpayer surveys, focus group discussions (FGDs), and interviews with key stakeholders in government, civil society, and donor agencies. Findings We highlight two key findings. First, meaningful transparency requires that information is comprehensive, relates to taxpayers’ priorities, and serve as a basis for dialogue between taxpayers and governments. Second, there is a need to proactively encourage taxpayer engagement by supporting forums for engagement that taxpayers perceive as safe, secure and sincere. This has been most successful where governments have visibly demonstrated responsiveness to citizens’ concerns, even on a small scale, while partnering with civil society to foster trust and dialogue. Policy implications Our findings point to the need for taxpayer education and engagement programmes that make information more accessible and more directly relevant to taxpayers’ everyday experiences. In particular, policymakers and development partners need to expand existing efforts to facilitate engagement and dialogue regarding what revenues are collected and how they are spent. We highlight the valuable role that civil society can play as translators of tax information, enablers of public forums, and trainers to support greater tax literacy and sustained taxpayer engagement. |
| Keywords: | Economic Development, |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:17013&r= |
| By: | Łukasz Rawdanowicz; Sébastien Turban; Jörg Haas; David Crowe; Valentine Millot |
| Abstract: | Over the past several decades, public debt has increased substantially in many OECD countries, particularly in the aftermath of recessions. The extent of this increase and the resulting debt levels varied across countries, partly reflecting differences in average budget balances. Despite rising debt, governments’ interest payments as a share of GDP have declined, reducing concerns about debt sustainability. Still, high debt levels make public finances vulnerable to negative shocks. Thus, governments will have to balance the need to minimise the risk of fiscal stress and the need to satisfy growing demands on public finances related to population ageing, climate change, low growth, inequalities, accelerated digitalisation and cyclical demand stabilisation. Limitations of various numerical indicators of debt sustainability give some support to a more qualitative assessment of fiscal policy and stress the importance of effective and resilient fiscal frameworks. Credible and transparent fiscal frameworks can help make appropriate policy choices, which are affected by numerous political biases and constraints. However, such frameworks do not guarantee positive outcomes. Further research on interactions between various elements of such frameworks, such as fiscal rules, medium‑term expenditure plans, budget transparency and independent fiscal institutions, is needed. |
| Keywords: | debt sustainability, fiscal frameworks, fiscal rules, independent fiscal institutions, public finances, sovereign debt |
| JEL: | E61 E62 H11 H20 H50 H62 H63 |
| Date: | 2021–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1694-en&r= |
| By: | Daniel Aparicio-Pérez (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | The link between fiscal decentralization and economic growth is a work-horse field of research which has historically arrived to ambiguous conclusions. Nevertheless, less is known about the regional consequences of an asymmetric decentralized system as in the case of Spain. In this article, we provide evidence for the literature evaluating the two-extreme-cases regions (The Basque Country and The Valencian Community) in terms of how they have been benefited/harmed, after the approval of their respective more recent critical laws regarding the Spanish fiscal decentralization process: (i) the Basque Economic Agreement (BEA, hereinafter) approved in 2002 and (ii) the 2001-model within the common financing system. To undertake this analysis, we develop our empirical strategy based on diff-in-diff regression and the Synthetic Control Method. We intend to demonstrate that an asymmetric fiscal decentralized system, based on cultural or political reasons rather than economic ones, is not innocuous for the economic development of a given region and it has quasi-permanent consequences in terms of convergence for the whole country. We find that the BEA approved in 2002 would have increased the Basque Country level of GDP per capita under diff-in-diff regression and under Synthetic Control method. Conversely, we also find that the approval of the 2001-model, within the common financing system, has implied a considerably reduction in the Valencian level of GDP per capita, also under both methods. |
| Keywords: | economic growth, fiscal decentralization, difference-in-differences, synthetic control method |
| JEL: | C22 H11 H73 H77 O40 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2021/15&r= |