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on Public Economics |
| By: | Marius Brülhart; Marko Koethenbuerger; Matthias Krapf; Raphael Parchet; Kurt Schmidheiny; David Staubli |
| Abstract: | Switzerland could be considered as a test case for international corporate-tax policy coordination. It is a federation of 26 fiscally autonomous cantons that have been taxing corporate profits more or less independently for over a century. We document and discuss corporate taxation in Switzerland, with a focus on three aspects: (a) the evolving within-country geography of taxable profits and corporate tax rates, (b) the nature and historical emergence of formal tax-base harmonization, and (c) the functioning of fiscal equalization. Parallels are drawn and differences are discussed relative to ongoing efforts at international tax coordination. |
| JEL: | H25 H71 H77 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31830&r=pbe |
| By: | Stefano Boscolo; Francesco Figari |
| Abstract: | We study the redistributive effect of inflation-induced revenue and expenditure variations in the Italian tax-benefit system in a context in which pensions and social transfers are indexed to inflation and nominal wage growth struggles to keep up. By means of the EUROMOD microsimulation model, we isolate the contribution of i ) fiscal drag through the personal income tax, ii ) indexation rules and policy changes regarding social insurance contributions and iii ) pension and social transfer indexation rules related to the overall redistributive effect of the tax-benefit system and its vertical and horizontal components. The findings suggest that benefit indexation rules contribute to a non-negligible extent to income redistribution, that fiscal drag has a small regressive effect and that the implicit redistribution favours pensioners over private-sector employees. |
| Keywords: | inflation; indexation; fiscal drag; redistribution; EUROMOD |
| JEL: | D31 H23 H24 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:mod:cappmo:0187&r=pbe |
| By: | Felix Hugger; Ana Cinta González Cabral; Pierce O’Reilly |
| Abstract: | The effective taxation of corporate profits is at the centre of an active public and academic debate. This debate is often focused on the extent of low-taxed profit of multinational enterprises (MNEs) in jurisdictions with low statutory tax rates or low average effective tax rates (ETRs). However, some affiliates in high tax jurisdictions may also be subject to low ETRs, due to tax incentives or other provisions. To date, a global accounting of the ETRs paid by MNEs that incorporates within-country heterogeneity has been missing. Using a new dataset on the global activities of large MNEs, this paper provides new estimates of the distribution of effective tax rates of large MNEs across and within jurisdictions. The results show that low tax profit is common, and that substantial low-taxed profit exists outside low tax jurisdictions. We estimate that high tax jurisdictions (jurisdictions with average ETRs of above 15%) account for more than half (53.2%) of global profits taxed below 15%, much more than very low tax jurisdictions (those with average ETRs below 5%) which only account for 18.7% of low-taxed profits. This suggests that an assessment of global low-taxed profit that focuses only on jurisdictions with low average ETRs could potentially miss out on more than half of global low-taxed profit. |
| JEL: | H F |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ctpaaa:67-en&r=pbe |
| By: | Brendan K. Beare; Alexis Akira Toda |
| Abstract: | This article concerns the optimal choice of flat taxes on labor and capital income, and on consumption, in a tractable economic model. Agents manage a portfolio of bonds and physical capital while subject to idiosyncratic investment risk and random mortality. We identify the tax rates which maximize welfare in stationary equilibrium while preserving tax revenue, finding that a very large increase in welfare can be achieved by only taxing capital income and consumption. The optimal rate of capital income taxation is zero if the natural borrowing constraint is strictly binding on entrepreneurs, but may otherwise be positive and potentially large. The Domar-Musgrave effect, whereby capital income taxation with full offset provisions encourages risky investment through loss sharing, explains cases where it is optimal to tax capital income. In further analysis we study the dynamic response to the substitution of consumption taxation for labor income taxation. We find that consumption immediately drops before rising rapidly to the new stationary equilibrium, which is higher on average than initial consumption for workers but lower for entrepreneurs. |
| Keywords: | consumption tax; income tax; optimal taxation |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2023-06&r=pbe |
| By: | van 't Riet, Maarten; Lejour, Arjan |
| Abstract: | Analysis of the international network of double tax treaties reveals a large potential for tax avoidance. Developing countries are not, on average, more likely to suffer from tax revenue losses than other countries. Yet, this average masks that several countries, such as Bangladesh, Egypt, Kenya, Indonesia, Uganda and Zambia, are all vulnerable to substantial potential losses of withholding tax revenue by treaty shopping. The treaties responsible for this are referred to as potentially aggressive tax treaties. This is concluded by two Dutch economists and tax scholars, in a study commissioned by ICTD. Summary of Working Paper 173. |
| Keywords: | Finance, Trade, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18169&r=pbe |
| By: | Kelly Bishop; Jakob Dowling; Nicolai V. Kuminoff; Alvin Murphy |
| Abstract: | The real economic cost of homeownership depends on an intricate system of taxes and subsides that vary over time and across the United States. We incorporate the key features of this system into a framework for measuring the annual user-cost of housing and we use it to document how housing costs and subsidies varied over time, across space, and with household demographics in 2016-2017. Then we examine how the Tax Cuts and Jobs Act of 2017 subsequently reduced subsidies and increased the relative cost of housing. We report how these changes varied by geography, homeownership, race, and voting behavior. |
| JEL: | H2 R2 R3 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31824&r=pbe |
| By: | Baumgart, Eike; Blaufus, Kay; Hechtner, Frank |
| Abstract: | Amid global climate change concerns, policymakers worldwide are increasingly scrutinizing environmentally harmful subsidies. This study examines the tax-deductibility of job-related commuting expenses, which has faced criticism for promoting longer commutes and congestion. Through a controlled, randomized survey experiment, we confirm that the tax-deductibility of commuting expenses results in longer commutes but does so with minimal economic impact. Increasing the deduction rate by e0.10 leads to an average acceptance of 377-meter-longer commutes. Surprisingly, subjects are inattentive to changes in the tax deduction's size when such changes are presented as tax-deductible expenses rather than as direct cash effects. In contrast, abolishing the tax deductibility significantly reduces average commuting distances by nearly 9 percent. These findings highlight people's responsiveness to the mere presence of the commuter tax break while being less sensitive to its specific size. Policymakers should consider these findings when evaluating the effectiveness of such tax deductions in mitigating climate change or their economic efficiency effects. |
| Keywords: | Commuting Behavior, Commuting Subsidies, Tax Policy, Tax Complexity, Rational Inattention |
| JEL: | D90 H21 H24 J22 R23 R28 R41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:279813&r=pbe |
| By: | Bontemps, Christian; Cherbonnier, Frédéric; Magnac, Thierry |
| Abstract: | The existence of transaction taxes reduces transactions, and in the case of housing, reduces household mobility and affects the costs of downsizing in dire times. We construct and estimate an overlapping generation model in which households are heterogeneous in age and earnings, and prudential regulation and the tax system are modeled in fine detail. These housing and public policies are likely to affect markets globally, and clearing both rental and property markets is important when evaluating them. We use the institutional and data setting of France, where transactions taxes are some of the highest in Europe, and evaluate the counterfactual impact of reducing transaction taxes from 14% to 6%, similar to US levels. The impact on transactions is strong, but the impact on welfare remains limited. |
| Keywords: | Heterogenous agents; dynamic structural models; general equilibrium; housing;; transaction taxes |
| JEL: | C68 D15 D58 H31 R21 R31 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128690&r=pbe |
| By: | Juan Carlos Conesa; Timothy J. Kehoe |
| Abstract: | By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up because the policy eliminates the danger. Mechanically, high taxes make the safe zone in the model — the set of sovereign debt levels for which the government prefers to repay its debt rather than default — larger. By announcing a high tax rate at the beginning of the period, the government ensures that tax revenue will be high enough to service sovereign debt becoming due, which deters panics by international lenders but is ex-post suboptimal. That is why, as it engages in preemptive austerity, the government continues to reduce the level of debt to a point where, asymptotically, high taxes are no longer necessary. |
| JEL: | E6 F3 F4 H2 H3 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31828&r=pbe |
| By: | José Maria Pires; Stephen Howlin; Mr. Frank van Brunschot |
| Abstract: | To improve the management of tax compliance risks, tax administrations are increasingly seeking opportunities to enhance their access and use of data. For many years, there has been a worldwide trend to implement electronic fiscal reporting (also known as fiscalization) to achieve these aims. Fiscalization refers to the process of automated reporting of a taxpayer’s business activities to the tax administration. When implemented as an integral part of compliance risk management processes, fiscalization will contribute to an improvement in tax compliance by making it easier for taxpayers to voluntarily comply, and discouraging taxpayers who may choose to not report their business transactions. However, fiscalization alone will not address all tax compliance risks. This how-to note provides practical guidance about the case for fiscalization and implementation approaches, including good practices and practices to avoid in relation to the key dimensions of fiscalization: data collection, data analysis, integration with compliance risk management, consumer engagement, and implementation. |
| Keywords: | tax compliance; fiscalization; electronic fiscal devices |
| Date: | 2023–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfhtn:2023/003&r=pbe |
| By: | Congressional Budget Office |
| Abstract: | In 2020, the coronavirus pandemic and the tax and transfer policies enacted by the federal government in response had significant effects on the distribution of household income. Average income before transfers and taxes decreased by 10 percent for households in the lowest quintile and increased by 6 percent for those in the highest quintile. By contrast, average income after transfers and taxes grew by 15 percent among households in the lowest quintile and by 7 percent among those in the highest quintile. |
| JEL: | H20 H24 H50 J30 |
| Date: | 2023–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:59509&r=pbe |
| By: | Martin Kahanec; Martin Guzi |
| Abstract: | The welfare magnet hypothesis, also referred to as welfare shopping or welfare tourism, that migrants make location choices based on the provision of welfare benefits in alternative destinations, has resonated in the academic as well as public discourse on migration. This chapter summarizes theoretical models behind the welfare magnet hypothesis and reviews the empirical evidence on welfare-induced migration. The literature is inconclusive on the matter. Whereas there are theoretical arguments why welfare might matter for migration flows and several studies find a small positive association between welfare and migration, other studies find no such effects. In particular, some studies show that controlling for the endogeneity of welfare in the welfare-migration nexus reduces or eliminates the effect of welfare generosity on immigration. On the other hand, recent quasi-experimental studies demonstrate some effects of welfare on the location choices of asylees and refugees. Exploring a unique European dataset, this chapter contributes to this literature by providing some evidence that better accessibility of social assistance for immigrants is associated with larger immigrant inflows. Overall, the consensus in the literature is that the effects of welfare on migration are relatively small compared to other drivers of migration. The chapter concludes with highlighting the broader implications of the welfare magnet hypothesis and provides guidance for future research about it. |
| JEL: | H53 J15 J61 J68 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:cel:dpaper:65&r=pbe |
| By: | OECD |
| Abstract: | This paper resents a measurement framework aiming to support the collection of comprehensive and internationally comparable quantitative and qualitative information on governmental innovation support programmes and instruments. It proposes a taxonomic system with definitions, classifications and reporting conventions aligned with OECD and other international standards. The framework is intended to support future OECD measurement efforts in this area and the analysis of innovation support portfolios within and across countries. |
| Keywords: | Business, Innovation, Public support, R&D, technology |
| JEL: | H50 H60 O30 H25 |
| Date: | 2023–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaac:160-en&r=pbe |
| By: | Robert J. Barro; Francesco Bianchi |
| Abstract: | The fiscal theory of the price level (FTPL) has been active for 30 years, and the interest in this theory grew with the recent global surges in inflation and government spending. This study applies the FTPL to 37 OECD countries for 2020-2022. The theory’s centerpiece is the government’s intertemporal budget constraint, which relates a country’s inflation rate in 2020 2022 (relative to a baseline rate) to a composite government-spending variable. This variable equals the cumulative increase in the ratio of government expenditure to GDP from 2020 to 2022, divided by the ratio of public debt to GDP in 2019 and the duration of the debt in 2019. This specification has substantial explanatory power for recent inflation rates across 20 non-Euro-zone countries and an aggregate of 17 Euro-zone countries. The estimated coefficients of the composite spending variable are significantly positive, implying that 40-50% of effective government financing came from the inverse effect of unexpected inflation on the real value of public debt, whereas 50 60% reflected conventional public finance (increases in current or future taxes or cuts in future spending). Within the Euro area, inflation reacts mostly to the area-wide government-spending variable, not to individual values. |
| JEL: | E3 H20 H5 H60 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31838&r=pbe |
| By: | Yu-Ting Chiang; Jesse LaBelle |
| Abstract: | When inflation surprises to the upside, borrowers pay back less in real terms. And Uncle Sam is America’s biggest borrower. |
| Keywords: | inflation; taxation; borrowing |
| Date: | 2022–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:l00001:94116&r=pbe |