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on Accounting and Auditing |
| By: | Lant Pritchett, Yamini Aiyar |
| Abstract: | There are two dominant narratives about taxation. One is taxes are the “price we pay for a civilized society” (Oliver Wendell Holmes Jr.). In this view taxes are not a necessary evil (as in the pairing of “death and taxes” as inevitable) but a positive good: more taxes buy more “civilization.” The other view is that taxes are “tribute to Leviathan”—a pure involuntary extraction from those engaged in economic production to those who control coercive power producing no reciprocal benefit. In this view taxes are a bane of the civilized. We consider the question of taxes as price versus tribute for contemporary India and make three points. First, most discussions of government budgets focus on allocations across sectors and activities, focusing on the accounting cost of services provided. But if the accounting cost exceeds the economic cost (the minimum at which the good or service could have been provided), then the difference can be considered “tribute.” Second, to the extent that government engages in activities which would not have otherwise been carried out at all but which citizens value, the “price of civilization” is maximized. In contrast, when government budgets produce private goods at such low quality they are valued at zero by many, then those taxpayers consider this tribute. Third, the structure of social spending between “insurance”-like programs which benefit all individuals at various states or stages of life, and sharply targeted transfer programs determines whether most taxpayers consider taxes to fund these expenditures a price or tribute. The notion of a “compulsory purchase” versus “tax” helps elucidate this difference, and sharp targeting is seen as raising the price to any given individual of a given degree of individual benefit. Taken together we argue India needs more taxes as price of civilization but less taxes as tribute, which currently dominate. There is currently a sharp contradiction between the needs for greater revenue mobilization for India to continue its progress and provide the increasingly sophisticated “civilization” demanded with higher productivity and incomes, and the perception of the “middle class” that most taxes are tribute. This contradiction is created by a costly and yet ineffective state the solution to which can neither be a weaker state on the one hand nor more tribute paid to dysfunction on the other, but rather a better state. |
| JEL: | H2 H21 H71 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:412&r=all |
| By: | Mukherjee, Sacchidananda (National Institute of Public Finance and Policy) |
| Abstract: | To remove cascading effect of taxes and provide a common nation-wide market for goods and services, India is moving towards introduction of Goods and Services Tax (GST). Under the proposed indirect tax reform both Central and State Governments will have concurrent taxation power to levy tax on supply of goods and services. It is expected that the proposed regime will improve tax collection and minimize leakage, as both Central and State Tax Administrations will monitor and assess same set of taxpayers. There are several challenges before introduction of GST and these can be classified into two broad heads - a) GST Design and Structure related, and b) GST Administration and Institutional. On design related issues, broad consensus on choice of revenue neutral rates (RNRs), harmonization of GST rate(s) across States, harmonization of list of exempted and excluded goods and services and thresholds for mandatory GST registration across States are yet to be reached. Similarly, there are several issues involved in tax administration (between Central and State Tax Administrations and also across State Tax Administrations) which are not yet solved. Taking cognizance of discussion available in the public domain this paper attempts to provide a broad contour of the proposed GST regime and highlights major challenges which require immediate attention of the Governments. |
| Keywords: | Goods and Services Tax ; Value Added Tax ; Design and Administration of Taxation ; Fiscal Federalism ; Indirect Taxation ; India. |
| JEL: | H25 H71 H77 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:15/154&r=all |
| By: | Dora Benedek; Ruud A. de Mooij; Philippe Wingender |
| Abstract: | This paper estimates the pass through of VAT changes to consumer prices, using a unique dataset providing disaggregated, monthly data on prices and VAT rates for 17 Eurozone countries over 1999-2013. Pass through is much less than full on average, and differs markedly across types of VAT change. For changes in the standard rate, for instance, final pass through is about 100 percent; for reduced rates it is significantly less, at around 30 percent; and for reclassifications it is essentially zero. We also find: differing dynamics of pass through for durables and non-durables; no significant difference in pass through between rate increases and decreases; signs of non-monotonicity in the relationship between pass through and the breadth of the consumption base affected; and indications of significant anticipation effects together with some evidence of lagged effects in the two years around reform. The results are robust against endogeneity and attenuation bias. |
| Keywords: | Value added tax;Consumer prices;Tax rates;Econometric models;Value added tax; Tax incidence; Price effect; Pass through; Europe. |
| Date: | 2015–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/214&r=all |
| By: | Michal Horváth; Matúš Senaj; Zuzana Siebertová; Norbert Švarda |
| Abstract: | The paper provides a quantitative assessment of the consequences of departing from a flat-tax system in the context of Slovakia. A behavioural microsimulation model of the labour supply is embedded into a general equilibrium framework with search and matching frictions. Some recently implemented changes in the tax system leave aggregate labour market indicators as well as inequality measures virtually unaffected. We also examine hypothetical revenue-neutral reforms that would significantly increase the progressivity of the system through graduated marginal tax rates. We find that there are narrow limits to what policy makers could accomplish through such reforms in terms of employment and equality of income. Hence, an income tax reform should at best be seen as a complementary tool to other initiatives promoting such objectives. Moreover, we highlight an important trade-off: income tax reforms that promote employment may harm growth. |
| Keywords: | flat tax, microsimulation, general equilibrium, search and matching, labour supply elasticity |
| JEL: | E24 H24 H31 J22 |
| Date: | 2015–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:cel:dpaper:33&r=all |
| By: | Rünger, Silke |
| Abstract: | I examine the influence of cross-border group taxation on ownership chains for European multinational firms. I show that the tax advantages of cross-border group taxation regimes can only be exploited if a multinational firm has at least one intermediate subsidiary in the country allowing for cross-border group taxation. I use the introduction of the Austrian cross-border group taxation regime as a natural experiment to test my hypothesis. I find that the probability that a foreign parent company holds an Austrian intermediate subsidiary is significantly higher after the introduction of the group taxation regime. However, I am only able to observe this effect for parent companies already invested in Austria prior to the introduction of the cross-border group taxation regime. I am unable to provide evidence that this also holds for parent companies who are not invested in Austria prior to the introduction of the cross-border group taxation regime. My results contribute to a nascent literature that examines the influence of taxes on ownership chains, and a larger literature on (intermediate) subsidiary location decisions for multinationals. My findings provide empirical evidence that could be useful to governments in those countries attempting to reform their group taxation regimes, or who are implementing cross-border group taxation regimes for the first time. |
| Keywords: | group taxation,ownership chains,intermediate subsidiaries,Austria |
| JEL: | F23 H25 K34 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:194&r=all |
| By: | International Department (Bank of Japan) |
| Abstract: | Until last year, the International Department of the Bank published two separate annual reports on developments in Japan's balance of payments (BOP) and international investment position (IIP) under the BOJ Reports & Research Papers series. From this year onward, however, developments in Japan's BOP and IIP -- for the preceding calendar year and at year-end of the preceding calendar year, respectively -- will be presented collectively in a single annual report. This reflects the switch to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) as the basis for the compilation of Japan's BOP related statistics for data from January 2014 onward. Published by the International Monetary Fund (IMF), the Balance of Payments Manual provides the international standard for compiling the BOP and IIP. In the revision of the manual for the sixth edition, balance sheet items were expanded, allowing analyses that more organically connect transactions in the current and financial accounts as well as the IIP. This was the result of a series of discussions among a group of statistical experts organized by the IMF, reflecting the growing international interest in balance sheet vulnerabilities after currency crises. Against this background, this report aims to present the BOP and IIP in a more unified manner. In addition, this report presents, in several boxes, analyses of new data series that became available with the switch to the BPM6-based statistics. First, Box 1 outlines the switch to the BPM6-based statistics in Japan while briefly explaining the background to the revision of the Balance of Payments Manual for the sixth edition. Then, using data series newly released with the switch to the BPM6-based statistics, Boxes 3 and 7 respectively examine developments in direct investment income by region and industry, and in the composition of yen-denominated assets and foreign currency-denominated liabilities. |
| Date: | 2015–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojron:ron150930a&r=all |
| By: | Timothy Irwin |
| Abstract: | Fiscal reporting is intended to warn of fiscal crises while there is still time to prevent them. The recent crisis thus seems to reveal a failure of fiscal reporting: before the crisis, even reports on fiscal risk typically did not mention banks as a possible source of fiscal problems. One reason for silence was that the risk arose partly from implicit guarantees, and governments may have feared that disclosure would increase moral hazard. The crisis cast doubt, however, on the effectiveness of silence in mitigating risks. This paper discusses how fiscal risks from the financial sector could be discussed in reports on fiscal risk, with a view to encouraging their mitigation. |
| Keywords: | Financial sector;Moral hazard;Fiscal risk;Contingent liabilities;Financial crises;Financial crises;Risk management;Implicit guarantees, fiscal risks, financial crisis, budget reports, guarantees, debt, liabilities, Forecasts of Budgets, Deficits, and Debt, |
| Date: | 2015–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/208&r=all |
| By: | Martín Ardanaz; Ana Corbacho; Alberto Gonzáles; Nuria Tolsa Caballero |
| Abstract: | Over the past decade, an increasing number of countries have began anchoring their fiscal policy frameworks in terms of rules that target the cyclically adjusted or structural (as opposed to actual) balance in an effort to overcome problems of procyclicality and fiscal volatility. The logic for doing so is in principle compelling: rule-based fiscal policies allow automatic stabilizers to work freely during the cycle and help accumulate fiscal surplus in good times. However, the estimation of structural balances is subject to a number of methodological challenges, including the degree of estimation uncertainty. This paper presents a range of estimates of the structural budget balance and uses them to analyze the cyclical behavior of fiscal policy in Latin America and the Caribbean. Based on an original dataset comprising detailed fiscal information from 20 countries across the region between 1990 and 2012, the paper finds that the range of estimates can be large for some countries, especially those that derive substantial fiscal revenue from commodity-related activities. In addition, the evidence shows that on average, the region has followed a procyclical policy pattern: a 1 percent increase in the output gap is associated with up to a 0.66 percentage point deterioration in the structural primary balance. This pattern hides substantial regional heterogeneity: procyclicality is more marked in countries that face large terms of trade shocks, but it can be counteracted by higher institutional quality. |
| Keywords: | Production & Business Cycles, Fiscal Policy, Taxation, structural fiscal balances, cyclicality, business cycle, commodity prices, institutions |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:89816&r=all |
| By: | Eichfelder, Sebastian; Lau, Mona |
| Abstract: | We argue that the tax capitalization effect is a function of the attention of market participants. Market reactions can therefore be driven not only by the announcement dates of tax events but also by factors influencing the dissemination of tax information, such as deadlines and media reports. Analyzing the introduction date of the earlier-announced German capital gains tax reform of 2009 by triple-difference estimation, we find evidence of a delayed market reaction long after the announcement date. Within the last two (five) trading days before the deadline, we observe a sharp increase in abnormal trading volumes of 151.7% (104.0%). The aggregate abnormal return of the German capital market in the last five trading days in 2008 was 10.6%. Furthermore, we find a significant and positive correlation between trading volumes and measures for awareness of the upcoming tax reform (Google searches and media reports). |
| Keywords: | capital gains tax,asset pricing,tax awareness,tax arbitrage,turn-of-the-year effect,market efficiency |
| JEL: | G02 G12 H24 M41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:195&r=all |