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on Public Finance |
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Issue of 2016‒10‒23
ten papers chosen by |
| By: | Sabet, Navid |
| Abstract: | This paper documents the impact of voter turnout on top marginal tax rates in the 34 OECD countries for the period between 1974 and 2014. Across a number of specifications, I find that increases in voter turnout have a positive and statistically significant effect on top tax rates. This finding is broadly consistent with the median voter theorem that posits government redistribution to be a function of the income of the median voter. Because turnout has fallen drastically in the decades leading to 2014, and because the decrease is strongly correlated with income, the pivotal voter is no longer the one whose income lies near the median of the overall income distribution but instead the one whose income is at the median of a much richer subset of the distribution. Using ordinary least squares estimation as well as panel data methods, I find that increases in turnout are associated with higher rates of income tax for top earners. An instrumental variables approach confirms my hypothesis, though the estimates are less precisely estimated. |
| Keywords: | voter turnout; income tax; redistribution; government policy |
| JEL: | H24 I38 P16 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:29636&r=pub |
| By: | Mario Alloza (Bank of Spain; Centre for Macroeconomics (CFM)) |
| Abstract: | This paper investigates how taxes affect relative mobility in the income distribution in the US. Household panel data drawn from the PSID between 1967 and 1996 is employed to analyse the relationship between marginal tax rates and the probability of staying in the same income decile. Exogenous variation in marginal tax rates is identified by using counterfactual rates based on legislated changes in the tax schedule. I find that higher marginal tax rates reduce income mobility. An increase in one percentage point in marginal tax rates causes a decline of around 0.8% in the probability of changing to a different income decile. Tax reforms that reduce marginal rates by 7 percentage points are estimated to account for around a tenth of the average movements in the income distribution in a year. Additional results suggest that the effect of taxes on income mobility differs according to the level of human capital and that it is particularly significant when considering mobility at the bottom of the distribution. |
| Keywords: | Income mobility, Inequality, Marginal tax rate |
| JEL: | E24 E62 D31 D63 H24 H31 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1632&r=pub |
| By: | Claus Thustrup Kreiner; Søren Leth-Petersen; Peer Ebbesen Skov (Department of Economics,Auckland University of Technology, NZ) |
| Abstract: | A Danish tax reform, decided in May 2009 and taking effect from the beginning of 2010, lowered the marginal tax rate on top bracket taxable income from 63% to 56%. Because contributions to pension accounts are tax deductible, the reform provided an incentive to increase pension contributions before the change in taxation. Using high frequency panel data, we document an increase in pension contributions in the second half of 2009 in response to the anticipated change in taxation, and that this led to an increase in total savings. Length: 36 pages |
| Keywords: | Pension savings, tax incentives, high frequency individual data. |
| JEL: | H3 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:aut:wpaper:201606&r=pub |
| By: | Dorothea Schäfer |
| Abstract: | The study aims to assess the distributional effects of taxing financial transactions including a focus on gender. It specifically investigates the impact of the low interest rate environment on tax revenues and distribution. The first part of the study is explorative, aiming to develop a concept for the assessment. This is because the role of low or even negative interest rates is not yet specifically considered in the context of FTT. In the second part, the challenge is to find appropriate data for European countries in order to assess distributional effects. The study also highlights the existing data gaps that prevent a long-term evaluation of FTT with regard to tax revenues, impact, and distributional consequences. |
| Keywords: | European Union, financial transactions, tax burden, social sustainability |
| JEL: | G20 H21 H22 H23 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1609&r=pub |
| By: | Jean-François Brun (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); Maïmouna Diakite (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Taxation is one of the main components of a country’s fiscal space. Its internal origin and the accountability it creates between rulers and populations make it a key element in financing public expenditure. Tax capacity differs between countries and depends on structural factors. A number of empirical studies attempted to determine countries’ overall tax potential and tax effort (Lotz and Morss, 1967; Stotsky and Wolde Mariam, 1997; Fenochietto and Pessino, 2013). However, the methodologies used tend to underestimate or overestimate countries’ tax potential and thereby their tax effort. The purpose of this study is to better assess countries’ non-resource tax potential and VAT’s tax potential independently using a more appropriate method. It is in line with the study of Brun et al. (2014) and rests on a large sample of developing countries over the period 1980/2014. We first employ the previous models and discuss about their shortcomings, after we use the stochastic frontier model of Kumbhakar, Lien and Hardaker (2014). This model allows to disentangle the overall tax effort into a persistent tax effort due to policy economy decisions and a time-varying tax effort relating to tax administration efficiency. The results are more realistic. Low income countries have higher tax effort along the period even if their tax effort decline at the end of period on the opposite of resource depending countries. In fact, the latter characterized by lower tax effort compared to non-resource countries improved consequently the efficiency of their system since 2010. The results also suggest that inefficiency in taxation depends more on policy decisions than on tax administration performance. |
| Keywords: | Tax potential,Tax effort,Value-added tax,Non-resource revenues,Stochastic frontier model,Inefficiency. |
| Date: | 2016–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01332053&r=pub |
| By: | Grégoire Rota-Graziosi (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Pareto-improving tax coordination, and even tax harmonization, are Nash implementable between sovereign countries without any supranational tax authorities. Following Schelling's approach, we consider voluntary commitment, which constrains countries' respective tax rate choices. We develop a commitment game where countries choose their strategy sets in preliminary stages and play consistently during the final one. We determine the set of tax rates, which are implementable by commitment. This allows countries to reach Pareto-improving equilibriums. We also establish that complete tax harmonization may emerge as the subgame perfect Nash equilibrium of the commitment game as long as the asymmetry between countries remains limited. Our analysis contributes to the rationale of tax ranges and, more broadly, of non binding but self-enforcing commitments (not equivalent to cheap talk) in the context of tax competition. |
| Keywords: | Tax competition,Tax coordination,Commitment. |
| Date: | 2016–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01332058&r=pub |
| By: | Daniel Hopp; Michael Kriebel |
| Abstract: | This paper studies interregional competition for firms when the bidding is decided upon majority voting. We model the competition as an auction under full information between two asymmetric regions inhabited by low- and high-skilled individuals. We derive two results: First, the location decision is inefficient in most cases, especially when the median voter is high-skilled. Second, winning the auction is harmful for the region if the political process and a strong competition lead to subsidies which exceed the surplus created by a firm's location. This implies that restricting interregional competition for firms, e.g. regulating subsidies, may enhance welfare. Furthermore, our model shows that countries with high redistributive taxes and a low-skilled majority have an advantage to attract foreign firms. |
| Keywords: | median voter, political economy, subsidy competition, spillover |
| JEL: | H23 H25 H31 P16 R11 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:cqe:wpaper:5616&r=pub |
| By: | Steve Bond (University of Oxford); Kyung Yeon Ham (University of Oxford); Giorgia Maffini (University of Oxford); Andrea Nobili (Associazione Bancaria Italiana); Giacomo Ricotti (Bank of Italy) |
| Abstract: | This paper explores the effect of taxation on the capital structure of banks. For identification, we exploit exogenous regional variations in the rate of the Italian tax on productive activities (IRAP) using administrative, confidential data on regional banks provided by the Bank of Italy (1998-2011). We find that IRAP rate changes do not always lead to a change in banks’ leverage: banks close to the regulatory constraints do not change their leverage when tax rates change. This holds true for both tax cuts and tax hikes. Among less constrained entities, the leverage of smaller banks is more responsive to changes in tax rates than that of larger banks. Overall, the tax system has little effect on the capital structure of banks, especially for larger and possibly more systemically important institutions; regulatory constraints instead seem to be a first-order determinant. Our findings cast doubt on the role of the tax system as a cause or tool for addressing the negative externalities of excessive leverage in the banking system. |
| Keywords: | capital structure, debt, regulation, corporate tax, banks |
| JEL: | G21 G32 G38 H25 H32 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_361_16&r=pub |
| By: | Christian Ebeke (FMI - FMI - FMI); M Mansour (FMI - FMI - FMI); Grégoire Rota-Graziosi (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In the context of achieving the new Sustainable Development Goals, revenue mobilization is a high priority in developing countries and in Sub-Saharan Africa, where governments’ ability to tax remains limited. Using a unique revenue dataset spanning the period 1980-2010, we analyze three important tax reforms: the Large Taxpayers Unit (LTU), the Value Added Tax (VAT), and the Semi-Autonomous Revenue Agency (SARA). We propose an ex-post impact assessment of these tax reforms in SSA countries based on propensity-score matching methodology (PSM) and synthetic control method (SCM). VAT and SARA are found to have an unambiguously large and positive effect on non-resource taxes, while the impact of LTU is insignificant—LTU seems however an important precondition for the adoption of the first two reforms. We conclude also that VAT and SARA display some synergy, and their positive effects strengthen several years after their adoption. |
| Keywords: | Tax reforms,Africa,Revenue mobilization,Causality. |
| Date: | 2016–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01332049&r=pub |
| By: | Asatryan, Zareh; Peichl, Andreas |
| Abstract: | Using panel data on the full population of corporate tax returns of Armenian firms, we study the behavioral response of firms to three size-dependent regulations. We find: i) a strong response to an accounting notch where International Financial Reporting Standards become mandatory; ii) a moderate response to an administrative notch below which the frequency of filing and paying taxes declines from monthly to quarterly; and iii) no response to a tax notch created by the registration threshold of the value added tax. Exploiting tax audits, we provide evidence suggesting that income under-reporting drives the bunching response of firms by between 60 and 100 percent. Additional evidence suggests that firms respond to tax audits by compensating every additional dollar of audit driven increase in reported income by a 0.7-0.8 dollar increase in reported deductions. |
| Keywords: | small and medium enterprises,size-dependent regulation,value added tax,tax administration,tax accounting,tax evasion |
| JEL: | H25 H26 O12 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16065&r=pub |