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on Public Economics |
| By: | Agersnap, Ole (Yeh College, Princeton University); Bjørkheim, Julie Brun (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | Most tax systems around the world are highly complex. While several economists have studied the potential costs associated with tax complexity, few have explored if complexity can also have beneficial effects. In a novel model where taxpayers can acquire costly knowledge to reduce their tax burden, we show that when elasticities of taxable income are heterogeneous, a complex tax system can act as a sorting device similar to second-degree price discrimination, where more elastic taxpayers will invest in more tax knowledge. We prove that if elasticities are increasing with income, introducing tax complexity can allow the government to raise higher tax revenues at no efficiency cost. However, we show that complexity primarily benefits the highest earners and thus exacerbates inequality. In the empirical section of our work, we study a complex tax system in Norway. Using rich register data on business owners, we demonstrate that many taxpayers make accounting decisions that cause them to pay higher taxes than would have been possible, and we quantify the exact size of this tax overpayment at the individual level. We show that overpayment tends to be larger for women, the less wealthy, and immigrants. We validate our model predictions by showing that failure to optimize is associated with a lower estimated tax elasticity. |
| Keywords: | Taxation; Personal Income Taxes; Fiscal Policies and Behavior of Economic Agents: Household; Tax Evasion and Avoidance |
| JEL: | H20 H24 H26 H31 |
| Date: | 2024–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2024_004&r=pbe |
| By: | Treich, Nicolas; Espinosa, Romain |
| Abstract: | We provide a non-anthropocentric rationale for implementing a levy on meat consumption due to animal-welfare considerations. It operates as a Pigouvian tax and addresses externalities on farmed animals. Under total utilitarianism, the levy is a subsidy when an animal’s life is worth living, and a tax when it is not. Under average utilitarianism, it is always a tax when human welfare exceeds animal welfare. Even under conservative assumptions, calibrated tax levels are substantial and would make most-intensive animal farms unprofitable. Taxes are significantly higher for chickens and pigs than for cows, in contrast to the taxation of other meat externalities. |
| Keywords: | Animal welfare; meat; Pigouvian taxation; utilitarianism; life worth; living; quality-adjusted life years; population ethics. |
| JEL: | Q18 Q50 H41 I31 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129033&r=pbe |
| By: | Nicolas HÉRAULT; Stephen P. JENKINS |
| Abstract: | We decompose the redistributive effect of direct taxes into vertical, horizontal, and reranking components applying the methods of Urban and Lambert (Public Finance Review, 2008). In the first such application to the UK, and using yearly data covering 1977–2020, we find that redistributive effect increased over the period. However, there is no clear trend in horizontal inequity and this component forms a very small fraction of total redistributive effect by comparison with reranking and especially vertical components. It is also the vertical component that best tracks trends in redistributive effect. We give specific attention to the choice of the bandwidth used to define ‘close equals’ in terms of pre-tax income. We also show that implausible estimates of the horizontal inequity component arise for some years regardless of bandwidth used. |
| Keywords: | Redistributive effect; redistribution; horizontal inequity; reranking; Urban-Lambert decomposition; income tax |
| JEL: | D31 H24 H50 I38 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2023-11&r=pbe |
| By: | Dimitrakopoulou, Lydia; Genakos, Christos; Kampouris, Themistoklis; Papadokonstantaki, Stella |
| Abstract: | We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand. |
| Keywords: | pass-through; tax incidence; gasoline; value added tax (VAT); market structure; competition; Greek islands |
| JEL: | H22 L1 |
| Date: | 2023–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121321&r=pbe |
| By: | Seiyoun Kim; Vjollca Sadiraj; Yongsheng Xu |
| Abstract: | We conduct a laboratory experiment to study individual decision on donating to a charity in response to changes in the tax rate and income in the presence of matching and two types of rebate subsidies: deterministic and stochastic. Private consumption is taxed, and contributions are subsidized in a way that preserves the relative price of giving across the fundraising mechanisms. We find that tax framing and rebate subsidy elicit less charitable contribution than neutral framing and matching subsidy; the negative effect on donation is smaller for stochastic than deterministic rebate subsidies. Data suggest that charitable giving is a normal good and that donations and private consumption are complements. |
| Keywords: | charitable giving, tax deduction, rebate subsidy, matching subsidy, experiments |
| JEL: | H41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2023-01&r=pbe |
| By: | Leonard Mushunje |
| Abstract: | Revenues obtained from the corporate tax heads play significant roles in any economy as they can be prioritized for producing public goods and employment creations, among others. As such, corporate tax revenue should be paid enough attention. This study, therefore, explores the tax-revenue harvesting system of an economy where we focused on the corporate tax head. The system comprises three players; the government and formal and informal firms. We applied the predator-prey model to model the effect of the government-gazetted tax rate on corporate survivability. It is a new approach to modeling economic system relations and games. Critical combinatory points are derived, with stability analysis provided after that. Dynamics associated with the tax-revenue system are established and critically analyzed. Lastly, we provide the mathematical way the system can be optimized for the government to harvest as much Revenue as possible, including optimal conditions. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.13686&r=pbe |
| By: | Apeti, Ablam Estel; Edoh, Eyah Denise |
| Abstract: | Making tax administration more efficient and maximising voluntary compliance is a very difficult task for developing countries. In this paper, we analyse the effect of mobile money payments on the quality of tax policy and administration for a large sample of countries in developing economies. We use the World Bank indicator on efficiency of revenue mobilisation as a measure of the quality of tax policy and administration and employ an entropy balancing method to show that mobile money payments improve the quality of tax systems. This result is robust to several robustness tests, including sample alteration, alternative measures of mobile money, controlling for other aspects of tax policy, and alternative estimation methods such as GMM-system, event study approach and ordinary least square. In addition, our results show that the positive effect of mobile money on tax systems depends on the level of development, financial development, the state’s legitimacy, a country’s fiscal space, the number of available products/companies, the type of mobile money services, and the geographic position of countries. Finally, we highlight some potential mechanisms underlying these findings through lower tax compliance burden, smaller informal sector, and lower corruption. |
| Keywords: | Economic Development, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18214&r=pbe |
| By: | David R. Agrawal; James M. Poterba; Owen M. Zidar |
| Abstract: | This paper catalogues policies that have been deployed by jurisdictions seeking to mitigate the effects of tax competition. There are many instruments in this policy arsenal, since the tax base associated with a particular tax instrument may be affected by multiple policy choices, including some such as capital controls and development incentives that are outside the traditional realm of tax policy. This paper describes sixteen instruments that both federal and sub-federal governments have adopted in an effort to limit tax competition. It classifies them into three groups: those that can be pursued unilaterally, those that require bilateral or multilateral agreement, and those that require action by an external actor such as an overarching government. It also discusses the set of economic responses that are relevant to the evaluation of these policies, and then summarizes new evidence on the impact of a subset of these policy instruments in the United States and several other nations. |
| JEL: | H2 H3 H73 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32090&r=pbe |
| By: | Massimiliano Ferraresi (University of Ferrara); Benedikt Herrmann, European Commission, JRC-Ispra; Luisa Loiacono (University of Ferrara); Leonzio Rizzo (University of Ferrara & IEB); Riccardo Secomandi (University of Ferrara) |
| Abstract: | Can fiscal autonomy affect per-capita income levels? The existing literature shows mixed results on the impact of fiscal autonomy on GDP growth, it often uses cross-country datasets comparing nations with different socio-economic contexts. Even when it digs into the subnational entities of a nation either financial indexes or institutional dummies are used as proxies for fiscal autonomy: both can imply endogeneity due either to measurement errors or reverse causality. We empirically investigate the impact of fiscal autonomy on per-capita income stimulated by the proper use of local financial resources. We do this by exploiting an Italian natural experiment comparing the impact on per-capita income of the use of own resources in municipalities belonging to the autonomous provinces of Trento and Bolzano, which manage almost all their taxes autonomously, to those belonging to the neighbouring regions of Veneto and Lombardy, which manage only a small fraction of taxes paid by their citizens. We use a spatial fuzzy regression discontinuity design to compare similar municipalities on the border between the provinces of Trento and Bolzano and Lombardy and Veneto. We find that the higher the level of local financial fiscal autonomy, proxied by the ratio of own tax revenue to total revenue, the higher the level of per-capita income. The proxy is instrumented with a dummy indicating municipalities with a real institutional fiscal autonomy : those belonging to the provinces of Trento and Bolzano. This allows us to interpret the proxy as an exogenous variation indicating institutional fiscal autonomy. We find that a 10 percentage points increase in financial fiscal autonomy increases per-capita income by 3%. Hence, our results suggest that local governments that are more accountable and closer to citizens, manage their revenues in a more efficient way than in the case when they receive transfers from the centre. |
| JEL: | H71 H72 R11 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:112&r=pbe |
| By: | Jana Schuetz (Friedrich Schiller University Jena) |
| Abstract: | I conduct an online survey of 3, 000 respondents in the United States to examine individuals’ beliefs about the gender pension gap. By including an information provision experiment in which treated respondents are informed about the size of the gender pension gap, I examine whether receiving this information causally affects respondents’ perceptions of the fairness and drivers of the gender pension gap and their support for policies aimed at reducing it. I find that most respondents underestimate the gender pension gap and that treated respondents are less likely to perceive the gender pension gap as fair. In addition, treated respondents perceive the unequal distribution of care work and gender differences in wages as more important drivers of the gap, and their demand for remedial policies such as targeted financial education increases significantly. In terms of heterogeneity, I find that female respondents are generally less affected by the treatment than male respondents when asked about their policy views, although the treatment affects male and female respondents’ beliefs and perceptions about the gender pension gap similarly. |
| Keywords: | gender pension gap, survey experiment, information provision, pension reform preferences |
| JEL: | J26 J16 H55 C90 |
| Date: | 2024–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2024-004&r=pbe |
| By: | Szekeres, Szabolcs |
| Abstract: | Social Time Preference (STP) and Social Opportunity Cost (SOC) discounting differ in their objectives, but STP discounting measures capital costs incorrectly. The two-rate discounting method proposed here corrects this error, which current methods of shadow pricing capital (SPC) don’t. Thereafter project choice discrepancies between alternative methods decrease substantially and the choice between them becomes unambiguous. The SOC rate is the hurdle feasibility rate either way. The marginal cost of public funds (MCF) correction is not an alternative to SPC correction; both must be used in conjunction when warranted. The Ramsey equation is a tautology that cannot predict the STP rate. |
| Keywords: | Social discount rate; Prescriptive discounting; Descriptive discounting; STP discounting; SOC discounting; Two-rate discounting; Shadow Price of Capital; Marginal Cost of Funds; Declining discount rates; Ramsey rule. |
| JEL: | D61 H43 |
| Date: | 2024–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120014&r=pbe |
| By: | Boeri, Tito Michele; Gamalerio, Matteo; Morelli, Massimo; Negri, Margherita |
| Abstract: | We study whether a better knowledge of the functioning of pay-as-you-go pension systems and recent demographic trends in the hosting country affects natives' attitudes towards immigration. In two online experiments in Italy and Spain, we randomly treated participants with a video explaining how, in pay-as-you-go pension systems, the payment of current pensions depends on the contributions paid by current workers. The video also explains that the ratio between the number of pensioners and the number of workers in their countries will grow substantially in the future. We find that the treatment improves participants' knowledge about how a pay-as-you-go system works and the future demographic trends in their country. However, we find that only treated participants who support non-populist parties display more positive attitudes towards migrants, even though the treatment increases knowledge of pension systems and demographic trends for all participants. |
| Keywords: | information provision; experiment; immigration; pay-as-you-go pension systems; population ageing; populism |
| JEL: | C90 D83 H55 J15 F22 |
| Date: | 2023–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121343&r=pbe |