|
on Public Finance |
|
Issue of 2017‒07‒09
three papers chosen by |
| By: | Gilbert Mbara (University of Warsaw); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Ryszard Kokoszczynski (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland) |
| Abstract: | We develop a dynamic general equilibrium model in which firms may evade the employer contribution component of social security taxes by offering some workers secondary contracts. We calibrate the model to data from the United States and EU-14 countries and obtain estimates of the secondary labor market participation consistent with empirical evidence. We then investigate the optimal mix of the avoidable and unavoidable components of labor taxes and analyze the fiscal and macroeconomic effects of bringing the composition to the welfare optimum. We find that partial labor tax evasion makes tax revenues more elastic, but full tax compliance need not be a welfare enhancing policy mix. Relating to the highly cited work of Trabandt and Uhlig (2011), we extend their framework to analyze the phenomenon of non-standard employment. We distinguish between avoidable and unavoidable labor taxation -- the former may be evaded by firms if they formulate a contract with a worker as a non-standard employment contract and may be associated with employers' share in labor taxation. The latter is paid by worker--households. Our results enrich the intuition about the optimal mix of the two types of labor taxation. We show that in countries where the share of avoidable labor taxes is relatively low, substantial welfare gains can be achieved by changing the mix of the two types of labor taxes. The gains emanate from higher labor supply and consumption which accompanies modest increases in secondary employment. These gains are obtained without loss to aggregate fiscal revenue. In addition to these main results, we also show that plausible estimates of the levels of tax evasion, the efficiency of tax auditing and the shares of secondary employment can be obtained from aggregate tax revenue data. |
| Keywords: | Laffer curve, tax evasion, labor market duality |
| JEL: | H26 H3 E13 E26 J81 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2017-12&r=pub |
| By: | Aleksandar Vasilev |
| Abstract: | We show that in an exogenous growth model with informal economy calibrated to Bulgarian data under the progressive taxation regime (1993-2007), the economy exhibits equilibrium indeterminacy due to the presence of an unofficial production. These results are in line with the findings in Benhabib and Farmer (1994, 1996) and Farmer (1999). Also, the findings in this paper are in contrast to Guo and Lansing (1988) who argue that progressive taxation works as an automatic stabilizer. Un- der the flat tax regime (2008-14), the economy calibrated to Bulgarian data displays saddle-path stability. The decrease in the average effective tax rate addresses the indeterminacy issue and eliminates the ”sink” dynamics. |
| Keywords: | Progressive taxation; Informal Sector; Equilibrium (In)determinacy. |
| JEL: | H22 J46 D51 D91 O41 |
| Date: | 2017–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2017_07&r=pub |
| By: | Johanna Arlinghaus (OECD); Kurt van Dender (OECD) |
| Abstract: | In a bold policy effort, Mexico recently moved away from subsidies to transport fuels, increased tax rates on these fuels and introduced a carbon tax. This paper analyses these reforms using a broad set of criteria that consider the main practical dimensions of environmental policy design: environmental effectiveness, equity and distributional impacts, broader tax system impacts, macroeconomic effects, compliance and administration, policy process and consistency. The reforms significantly improve the extent to which the external costs of energy use are reflected in prices and increase government revenues, but, as price deregulation progresses further, more attention may need to be devoted to analysing and addressing the policies’ distributive effects. The analysis also highlights that ease of administration and collection are an important and desirable property of carbon taxes, especially in emerging market contexts. |
| Keywords: | carbon pricing, distributional effects, energy taxation, fossil-fuel subsidies, tax reform |
| JEL: | H23 Q48 Q52 |
| Date: | 2017–07–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ctpaaa:31-en&r=pub |