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on Public Finance |
| By: | Glenn P. Jenkins (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Owotomiwa C. Olubamiro (Cambridge Resources International Inc.); Mikhail Miklyaev (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Amin Sokhanvar (Cambridge Resources International Inc.) |
| Abstract: | Tax incentives are widely used to attract investment and stimulate economic growth, but they also pose challenges related to revenue loss, tax compliance, and administrative efficiency. This report provides a structured framework for evaluating tax incentives in Madagascar, assessing their fiscal and economic impacts while ensuring alignment with the country’s development objectives. The report introduces methodologies for analyzing tax expenditures across different tax categories, including corporate income tax (CIT), value-added tax (VAT), excise taxes, and trade taxes. It emphasizes the importance of cost-benefit analysis (CBA) to determine whether tax incentives generate sufficient economic benefits to justify their fiscal costs. Additionally, the report discusses the role of stakeholder analysis in understanding how different tax measures affect businesses, government revenue, and public welfare. This report explores the risks associated with tax incentives, such as potential revenue leakages, compliance challenges, and the administrative burden on tax authorities. It highlights best practices for monitoring and evaluating tax policies to improve transparency and accountability. The findings of this study provide policymakers with essential guidelines for designing effective and sustainable tax incentives. By adopting a rigorous evaluation approach, Madagascar can enhance its tax policy framework, ensuring that incentives contribute to long-term economic growth without undermining public finances. |
| Keywords: | Cost-Benefit Analysis (CBA), Corporate Income Tax (CIT), Fiscal Policy, Tax Incentives, Tax Expenditure Analysis |
| JEL: | H2 H3 H4 H5 O2 O5 |
| Date: | 2025–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:qed:dpaper:4628 |
| By: | Charles Labrousse (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INSEE - Institut national de la statistique et des études économiques (INSEE)); Yann Perdereau (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Distributive effects of carbon taxation are key for its political acceptability. We introduce geographical heterogeneity into a calibrated dynamic general equilibrium heterogeneous-agent model, where energy is both a consumption good and an intermediate input. We evaluate the aggregate and distributive effects of carbon taxation and obtain three key results. First, the distributive effects of carbon taxation are driven by geography more than income, with rural households suffering larger welfare losses. Second, taxing households' direct emissions is regressive, while taxing firms' direct emissions is progressive. Third, we simulate various revenue-recycling policies using targeted transfers. We find that it is possible to reduce emissions and mitigate welfare losses associated with the green transition. |
| Keywords: | Carbon taxes, Energy, Fiscal policy, Emissions, Macroeconomic effects, Inequalities, Geography |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04464900 |
| By: | Shigeo Morita (Fukuoka University); Yukihiro Nishimura (Osaka University and CESifo); Hirofumi Okoshi (Okayama University) |
| Abstract: | As development of online market brings ongoing concerns that foreign app suppliers avoid value-added tax (VAT) in a domestic country, some countries design a tax reform which makes platform pay VAT instead of app suppliers (platform taxation). In the market where the monopoly platformer determines the prices of the network good and the commission fee of the platform services (with online apps as a representative example), this study investigates whether the prevention of tax leaks by platform tax improves the welfare of the host country, as well as the extent of the cross-market incidence of the two-sided market. We find that the tax reform reduces foreign app suppliers and consumption of a network good such as smartphones, with substantial extent of cross-market pass-through. The effect of the tax reform on home app suppliers crucially depends on the responsiveness of the app supplies from the number of users, which we call entry elasticity. Platform tax also increases the tax burden laid on the network product, but the monopoly seller let the increase of the tax burden born entirely by consumers. We also show that digitalization reduces the loss of welfare as well as tax planning by the platformer. |
| Keywords: | Value-added tax; Tax reform; Digital economy; Platform; Network externality |
| JEL: | F23 H26 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2502r |
| By: | van 't Riet, Maarten; Lejour, Arjan (Tilburg University, School of Economics and Management) |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:1f76049e-79f4-4b65-a474-7d458624950b |
| By: | Onnis, Luisanna (Cardiff Business School, Cardiff University); Piga, Claudio A. (Department of Economics, University of Genoa); Conti, Maurizio (Department of Economics, University of Genoa); Bottasso, Anna (Department of Economics, University of Genoa) |
| Abstract: | In July 2020, the UK government reduced the VAT rate on hospitality services from 20% to 5% as an emergency policy intervention. Using a novel dataset of detailed hotel room characteristics in the UK and elsewhere, we estimate how much of the tax cut was passed on to consumers via a price reduction. We find a statistically significant contemporaneous pass-through to hotel room prices that varies between approximately 20% and 50%, with a peak effect observed in the second week after the reform. However, the pass-through effect is discretionary, as discounts were negligible for rooms sold two months after the policy introduction. |
| Keywords: | VAT Cut; Pass-Through; Hospitality |
| JEL: | H22 H25 L83 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/4 |
| By: | Kuusi, Tero; Kotamäki, Mauri; Kirkko-Jaakkola, Mikael |
| Abstract: | Abstract Our analysis indicates that high marginal tax rates may diminish economic activity and weaken public finances in Finland. The existing literature credibly demonstrates that, particularly among highly productive workers, the distortive effects of taxation are more pronounced, impeding both career progression and intangible investments. Supporting research and development (R&D) activities can partially offset the adverse effects of stringent taxation. However, the innovation system should be optimized to effectively internalize the externalities associated with innovations. |
| Keywords: | Taxation, Marginal tax rate, Laffer curve, Externalities, Intangible capital |
| JEL: | D6 E6 H2 H3 J2 J3 |
| Date: | 2025–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:rif:report:158 |
| By: | Emmanuel Saez; David G. Seim |
| Abstract: | This paper shows that two features of wealth tax administration in Sweden—(1) filing requirements and (2) pre-populated returns—have a large impact on compliance even in an environment with highly-developed third-party reporting through information returns, challenging the conventional wisdom that third-party information returns are a silver bullet for successful tax enforcement. Up to 1993, everybody had to fill in wealth information when filing the (joint) income and wealth tax return. In 1994-1996, only those with net wealth above the exemption threshold (approximately the top 10%) needed to fill in wealth information. This leads to a very large reduction of about half of the number of taxpayers slightly above the wealth tax exemption threshold, and a reduction of about 20% of the total number of wealth taxpayers above the threshold. Starting in 1997, Sweden began pre-populating wealth information on tax returns for taxpayers with third-party-reported net wealth above the exemption threshold. Symmetrically, this immediately doubles the number of taxpayers slightly above the threshold and increases the number of all wealth taxpayers by almost 20%. We also show that the introduction of information returns for financial wealth in 1986 had a comparatively small impact on wealth reporting. |
| JEL: | H20 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33419 |
| By: | Glenn P. Jenkins (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Mikhail Miklyaev (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Amin Sokhanvar (Cambridge Resources International Inc.); Owotomiwa C. Olubamiro (Cambridge Resources International Inc.); Osaid Alshamleh (Vienna University of Economics and Business, Cyprus International University, North Cyprus, and Cambridge Resources International Inc.) |
| Abstract: | This report provides a comprehensive analysis of Ethiopia's tax expenditures (TEs) on imported goods, focusing on indirect taxes such as customs duties, excise taxes, value-added tax (VAT), and surtax. The study, conducted for the 2016 Ethiopian fiscal year (July 2023–July 2024), quantifies the revenue foregone due to various tax provisions, including exemptions, deductions, and preferential rates, and evaluates their alignment with Ethiopia's economic and social objectives. The report introduces three new components to enhance the accuracy of TE estimations: (1) border exemption substitutions for duty drawbacks, (2) border exemption substitutions for VAT credits, and (3) the estimation of behavioral changes resulting from tax provisions. Key findings reveal that customs duties account for the largest share of tax expenditures (53.83%), followed by VAT (34.05%), surtax (8.90%), and excise taxes (3.23%). The analysis highlights the significant role of "Special Permissions, " which constitute 72.83% of total TEs, raising concerns about potential misuse and inefficiencies. The report also identifies the sectors and commodities that benefit most from tax incentives, with agriculture, manufacturing, and health receiving the largest shares of TEs. Electrical machinery, fertilizers, and base metals are among the top commodity groups contributing to TEs. This report underscores the need for enhanced transparency, accountability, and periodic evaluation of tax expenditures to ensure they align with national development goals. Policy recommendations include stricter monitoring of Special Permissions, redirecting resources to high-impact sectors, and introducing sunset clauses for temporary exemptions. The findings aim to inform future tax policy reforms, promoting fiscal sustainability and maximizing the developmental impact of tax expenditures in Ethiopia. |
| Keywords: | Customs Duties, Ethiopia, Excise Taxes, Indirect Taxes, Tax Expenditures, Value-Added Tax (VAT) |
| JEL: | H20 H25 H26 H32 O23 |
| Date: | 2025–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:qed:dpaper:4629 |
| By: | Glenn P. Jenkins (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Mikhail Miklyaev (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.); Amin Sokhanvar (Cambridge Resources International Inc.) |
| Abstract: | This document provides a comprehensive analysis of tax incentives in Madagascar, offering policy recommendations to enhance efficiency, revenue generation, and economic growth. It examines key tax components, including excise taxes, the Value-Added Tax (VAT), trade taxes, and corporate tax incentives, identifying inefficiencies and proposing reforms to streamline administration and improve fiscal outcomes. The report highlights the need to simplify Madagascar’s excise tax system by narrowing the taxable goods range, reducing compliance costs, and improving public welfare. It also addresses VAT inefficiencies, noting that the country’s 359 exemptions undermine revenue potential and complicate tax administration. Recommendations include reducing unnecessary exemptions and enhancing compliance to boost fiscal sustainability. In trade taxation, the document advocates for optimizing import tariffs by eliminating excessive exemptions, thereby strengthening industrial growth and export competitiveness. Corporate tax incentives are assessed through Cost-Benefit Analysis (CBA) to ensure they generate genuine investment expansion and economic benefits. Additionally, the report emphasizes prioritizing public sector investments for climate resilience over private sector tax incentives, advocating for international support to address climate challenges effectively. By streamlining tax policies and aligning them with economic and social objectives, Madagascar can enhance revenue collection, promote sustainable investment, and strengthen climate resilience. These reforms will contribute to a more efficient, equitable, and growth-oriented tax system, supporting the country’s long-term development goals. |
| Keywords: | Excise Taxes, Impact Analysis, Tax Incentives, Corporate Income Tax (CIT), Revenue Tax Administration, Tax Exemptions, Economic Efficiency, Value-Added Tax (VAT) |
| JEL: | H2 H21 H23 F13 |
| Date: | 2025–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:qed:dpaper:4627 |