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on Public Economics |
| By: | Tomas Broukal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia); Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia); Miroslav Palansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czechia & Tax Justice Network, London, United Kingdom) |
| Abstract: | We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply it to 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits. |
| Keywords: | global minimum tax, profit shifting, multinationals, tax avoidance |
| JEL: | H25 H26 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2024_39 |
| By: | Giese, Henning; Heinemann-Heile, Vanessa |
| Abstract: | This study analyzes whether and to what extent the provision of public goods and firms' trust in local governments' handling of local business tax revenues are associated with firms' willingness to pay local business tax. Using survey data on German small- and medium-sized firms, we find that the average perceived provision of public goods is not associated with the willingness to pay local business tax. Separating public goods into private- and business-related public goods, we find that the perception of public goods related to the private sphere of firms' decision-makers is associated with an increase in firms' willingness to pay local business tax by about 10%. However, public goods related to the business sphere show no similar association. Contradictory to the perceived provision of public goods, we find surprisingly no association between firms' willingness to pay local business tax and the actual provision of public goods. Trust in local governments' handling of tax revenue increases firms' willingness to pay local business tax significantly, with an effect size of about twice as large as for the perception of provided private-related public goods. These findings indicate that the handling of tax revenues exerts a more pronounced influence on firms' willingness to pay than the actual utilization of these revenues. Documenting tax revenue implications, we further show that the average willingness to pay local business tax within a local government is associated with a significant decrease in tax avoidance by about 10%. Our results inform local governments about how the provision of public goods and the building of trust can sustainably contribute to firms' willingness to pay local business tax. Thus, our results contribute to the understanding of how taxes can be efficiently collected and effectively used. |
| Keywords: | Tax Perception, Business Taxation, Tax Avoidance, Public Goods, Tax Revenue |
| JEL: | H25 H26 H41 H71 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:303521 |
| By: | Gabriel Chodorow-Reich (Harvard and NBER); Matthew Smith (US Treasury Department); Owen Zidar (Princeton and NBER); Eric Zwick (Chicago Booth and NBER) |
| Abstract: | We evaluate the 2017 Tax Cuts and Jobs Act. Combining reduced-form estimates from tax data with a global investment model, we estimate responses, identify parameters, and conduct counterfactuals. Domestic investment of firms with the mean tax change increases 20% versus a no-change baseline. Due to novel foreign incentives, foreign capital of U.S. multinationals rises substantially. These incentives also boost domestic investment, indicating complementarity between domestic and foreign capital. In the model, the long-run effect on domestic capital in general equilibrium is 7% and the tax revenue feedback from growth offsets only 2p.p. of the direct cost of 41% of pre-TCJA corporate revenue. |
| JEL: | E23 F21 F23 H00 H25 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:pri:cepsud:328 |
| By: | Kevin S. Milligan; Tammy Schirle |
| Abstract: | We evaluate the retirement incentives embedded in Canada’s retirement income system with attention to where individuals are located in the income distribution. We find that larger social security benefits are available to individuals with lower earnings in their work history because of the benefit income tests, but those from the top of the income distribution tend to enjoy longer lives over which they may receive benefits. Overall, we see greater Social Security Wealth among individuals from lower deciles. The implicit tax rates on continued work tend to be higher for workers from lower-earning deciles. Considering changes to actuarial adjustments associated with early pension take up, these implicit tax rates on work at older ages fell substantially after 2011. Our regression estimates confirm the importance of incentives on retirement behavior, with substantially larger effects for individuals in lower deciles. These effects are greater for women than men. In simulations, we show that changes to the actuarial adjustment had some impact on retirement rates by lowering the implicit tax on work. The overall redistributive effect of these induced retirement changes was fairly small, however, as the actuarial adjustments brought the system closer to actuarial fairness. |
| JEL: | H55 J14 J26 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33069 |
| By: | Ash, Thomas; Nikolaishvili, Giorgi |
| Abstract: | Metcalf and Stock (2023) find that an increase in carbon tax has a weakly positive effect on output and employment, along with a negative effect on C02 emissions over a 6-year horizon. The paper identifies a carbon tax shock and uses it to quantify the effect of a permanent unexpected increase in the carbon tax rate. The effect of this increase is obtained using a policy counterfactual exercise based on dynamic effects estimated using panel local projections. We use the authors' own Stata replication package to reproduce the main results of the paper and carry out additional robustness tests. We also conduct these empirical analyses using popular open-source econometric libraries in R. We compare the original permanent carbon tax increase policy counterfactual impulse responses to standard one-time carbon tax shock impulse responses. The justification for this robustness test is that carbon tax rate changes are persistent, so that a transitory shock effectively mimics a permanent shock. We find that (1) the authors' replication package successfully reproduces the results of the paper; (2) alternative local projection specifications and policy counterfactuals largely exhibit the same qualitative properties as the main results of the paper. |
| Keywords: | carbon tax, policy counterfactual, panel local projection |
| JEL: | E23 E24 H23 Q54 Q58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:167 |
| By: | Claudiu Tiberiu Albulescu (Politehnica University of Timisoara) |
| Abstract: | This paper investigates the asymmetric relationship between corporate tax avoidance and total factor productivity (TFP) using firm-level data for 141 European oil and gas companies, covering the period 2007 to 2015. Firstly, we rely on the novel mechanism advanced by Rovigatti and Mollisi (2018) to compute firms’ TFP. Secondly, we resort to Canay’s (2011) panel data fixed-effect quantile approach to assess the nonlinear, asymmetric effect that tax avoidance has on a firm’s productivity. As novelty, we use two proxy variables to estimate tax avoidance, namely companies’ holding structures and tax haven location. We discover that the impact of tax avoidance on TFP is not straightforward. On the one hand, we report mixed empirical findings regarding the impact of firms’ organization in holding structures on TFP. On the other hand, tax haven location enhances the productivity of oil and gas companies from the extractive industry. Finally, we show that the impact of tax avoidance on TFP is stronger at higher quantiles, that is, for higher levels of productivity. Our findings show that offshore profit transfers represent a quite common practice for European oil and gas firms, in particular for the large companies, which helps them to increase their productivity level. In our analysis we control for the role of ownership structure, firm size, intangibles, indebtedness and energy price dynamics. To check the robustness we use different approaches to compute the TFP. |
| Keywords: | TFP, tax avoidance, oil and gas companies, tax haven, quantile regression |
| JEL: | O |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2024.15 |
| By: | Julien Albertini; Xavier Fairise; Anthony Terriau |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tep:teppwp:wp24-08 |
| By: | Bedoya, Fernando; Lassala, Belén |
| Abstract: | The implementation of the GloBE rules deriving from the OECD Inclusive Framework on Base Erosion and Profit Shifting can potentially impact investor's rights under international investment agreements, through the withdrawal of tax incentives. This Perspective identifies ways to limit States' exposure to investor-state dispute settlement. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:colfdi:303497 |
| By: | Koebel, Kourtney; Pohler, Dionne |
| Abstract: | We use administrative tax data to estimate the effect of the Working Income Tax Benefit (WITB) on the labour supply of single, low-income workers in Canada. Our analytical approach exploits low knowledge of the program, which has two important implications for our research design and identification strategy. First, low program knowledge allows us to treat WITB as an unconditional income transfer. Second, it generates variation in benefit receipt both between and within eligible tax filers over time. We find that benefit receipt has a robust positive effect on employment for single low-income workers, suggesting the additional income helps workers remain attached to the labour market. We also find that WITB receipt reduces labour supply at the intensive margin of work. The positive extensive margin and negative intensive margin results are consistent with a labour-leisure choice model that incorporates the fixed costs associated with working. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:clefwp:304303 |
| By: | Bruce D. Meyer; Jeehoon Han; James X. Sullivan |
| Abstract: | We examine how the well-being of those with few resources changed, amidst economic disruption and large, transitory government transfers. We find that in the years leading up to the pandemic and in 2020, the patterns for income and consumption poverty were very similar. In 2021 and 2022, however, changes in income and consumption poverty were quite different—consumption poverty fell less than income poverty in 2021, and then income poverty rose sharply in 2022 while consumption poverty continued to decline. Reports of hardships rose in 2022 for both families with and without children, suggesting increased concern about financial well-being as COVID-era transfer programs expired. A key difference between income and consumption measures appears to be saving during the pandemic followed by dissaving, even among those near the poverty line. This finding indicates that permanent income models can even be relevant when low-income households, that typically have very limited saving, receive very large transitory payments. Unlike past academic studies and numerous politicians and pundits that have attributed most of the decline in income poverty in 2021, and its subsequent rise in 2022, to the Child Tax Credit, we show that expanded Unemployment Insurance and stimulus payments played a larger role. |
| JEL: | E21 H23 H30 I38 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33052 |
| By: | Morsomme, Hélène (Université catholique de Louvain, LIDAM/ISBA, Belgium); Alonso-Garcia, Jennifer (Université Libre de Bruxelles); Devolder, Pierre (Université catholique de Louvain, LIDAM/ISBA, Belgium) |
| Abstract: | Population ageing undermines traditional social security pension systems that combine pay-as-you-go (PAYG) and defined benefits (DB). Indeed, demographic risk, if guaranteed benefits remain unaltered, will be borne entirely by workers through increases in the contribution rate. To avoid a substantial increase of the contributions and in order to maintain simultaneously the financial sustainability and the social adequacy of the public pension system, risk sharing and automatic balancing mechanisms need to be put in place. We present a two-step convex family of risk-sharing mechanisms. The first shares the risk between contributors and retirees through adjustments in the contribution rate, used to calculate the global covered wage bill, and the benefit ratio that represents the relationship between average pensions and wages. The second step studies how the retirees’ risk should be shared between the different retirees’ generations through adjustments in the replacement rate and a sustainability factor that affects pension indexation during retirement. We perform a detailed study of the effect of social planner’s targets and solidarity weight between various generations in a deterministic and stochastic environment. |
| Keywords: | Risk-sharing ; automatic balancing mechanisms ; pension design ; ageing |
| JEL: | H55 J18 G22 |
| Date: | 2024–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:aiz:louvad:2024011 |
| By: | Timothy K. M. Beatty; Joakim A. Weill |
| Abstract: | We estimate the impact of anticipated transfers on labor supply using confidential driver-level data from Uber. Leveraging the staggered timing of Social Security retirement benefits within each month and a novel identification strategy, we find that the labor supply of older drivers declines by 2% on average in the week around benefit receipt—a precisely estimated but economically small effect. Individual-level analyses reveal that the average effect obscures heterogeneous micro-behavior: while the majority of drivers does not meaningfully adjust labor supply in response to social security benefits, a small group reduces labor supply by more than 40%. The results suggest that departures from standard models of labor supply are meaningful but only for a small number of individuals. |
| Keywords: | Labor supply; Retirement; Social security; Gig economy |
| JEL: | J14 J18 J22 C10 H55 J26 |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2024-79 |
| By: | Denderski, Piotr; Obermeier, Tim |
| JEL: | E24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302341 |
| By: | Gustavo Adler; Mr. Cian Allen; Mr. Giovanni Ganelli; Mr. Daniel Leigh |
| Abstract: | This paper presents a dataset of fiscal consolidation for 17 OECD economies during 1978-2020 and 14 economies in Latin America and the Caribbean during 1989-2020. We focus on discretionary changes in taxes and government spending primarily motivated by a desire to reduce the budget deficit and not by a response to prospective economic conditions. To identify the motivation and budgetary impact of the fiscal policy changes, we examine contemporaneous policy documents, including central bank reports, Convergence Programmes and Stability Programmes submitted by the authorities to the European Commission, and IMF and OECD reports. The resulting series can be used to estimate the macroeconomic effects of fiscal consolidation. |
| Keywords: | Fiscal policy; taxation; government expenditure |
| Date: | 2024–09–27 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/210 |
| By: | Schultz, Alison |
| JEL: | H26 Q58 G23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302426 |