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on Accounting and Auditing |
| By: | Kimiko Terai (Faculty of Economics, Keio University) |
| Abstract: | This study examines interjurisdictional tax competition aimed at attracting portfolio investments by foreign creditors in sovereign bonds and corporate loans. In each of two jurisdictions, one with lower and the other with higher capital, governments maximize workers’ utility by choosing the volume of sovereign bond issuance to finance public inputs, the tax rate on creditors’ interest income, and the degree of compliance with bilateral treaty provisions concerning information exchange on creditors’ income. Under a bilateral treaty mandating only information exchange, the jurisdiction with initially lower capital tends to set a lower tax rate and exert less compliance effort, effectively functioning as a tax haven. In contrast, the jurisdiction with higher capital imposes a higher tax rate and demonstrates greater compliance, benefiting from the residence principle due to its substantial global interest income. Alternatively, under a bilateral treaty that combines information exchange with a withholding tax at source on foreign creditors, the two jurisdictions set the same tax rate on domestic creditors. This inadvertently weakens the incentives for the jurisdiction with higher capital to exchange information. These findings suggest that the specific design of international tax cooperation agreements critically shapes jurisdictions’ fiscal behavior, leading to divergent outcomes despite their shared objective of implementing residence-based taxation. |
| Keywords: | tax haven, interest income tax, home bias, Tax Information Exchange Agreement, Double Taxation Agreement |
| JEL: | H26 H54 H63 H73 |
| Date: | 2025–10–27 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2025-024 |
| By: | Rishi R. Sharma; Joel Slemrod; Michael Stimmelmayr; John D. Wilson; Peter Choi |
| Abstract: | Dual-regime business tax systems typically subject smaller firms to an output (turnover) tax and larger firms to a profit (corporate) tax. Despite their prevalence, there is little formal analysis of their optimal design. This paper addresses this gap by developing a theoretical framework to analyze the optimal tax parameters and the relative performance of two types of dual-regime systems: threshold and minimum tax systems. We show that either type of dual regime system can yield lower social costs than a single regime system. Using parameter values from recent empirical studies, we also show that a generalized minimum tax system we propose would outperform other dual regime systems under most parameter values. These findings carry important policy implications, particularly as many countries currently employ either threshold or minimum tax systems, but none have yet implemented a generalized minimum tax. |
| JEL: | H25 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34418 |
| By: | Priya Manwaring; Tanner Regan |
| Abstract: | Public disclosure of tax behavior is potentially promising for raising compliance in low-capacity states. This paper provides evidence on the social determinants of tax compliance through two cross-randomized experiments in Kampala, Uganda. We estimate effects of reporting delinquents and recognizing compliers. Compliance increases 17% for those subject to reporting but falls 16% for those promised recognition. Results support a model where being publicly known as tax-liable is costly but social sanctions for delinquency are limited. Further, disseminating tax behavior causes recipients to update compliance beliefs downward and reduces actual compliance by 20%. Overall, simple enforcement reminders raise more revenue. |
| Keywords: | property tax; tax morale; public disclosure; social image; Africa. |
| JEL: | H26 H30 D91 O18 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2025-010 |
| By: | Massenz, Gabriella (Research Institute of Industrial Economics (IFN)) |
| Abstract: | How do corporate tax systems shape the boundaries of the firm? This paper shows that nonlinear corporate income taxation can distort firms’ organizational structures by inducing tax-motivated firm splitting. I use administrative data on corporations and their owners and exploit two reforms that altered the tax benefits and costs of dividing a firm into multiple entities. First, I show that a temporary increase in the tax advantage of splitting reduces the share of firms filing jointly for corporate income tax purposes. Second, once the benefit is perceived as permanent and minimum capital requirements for new firms are abolished, the number of firms per entrepreneur rises significantly and persistently. Finally, I show that reorganizations are primarily driven by tax motives, as I find no effect on firms’ total assets, employment, or industry diversification. These findings highlight extensive-margin responses of business organization to corporate taxation, with relevant implications for the understanding of firm dynamics and for tax design. |
| Keywords: | Firm splitting; Corporate income tax; Tax avoidance |
| JEL: | H25 H26 H32 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1539 |
| By: | Holmberg, Johan (Department of Economics, Umeå University); Selin, Håkan (Institute for Evaluation of Labour Market and Education Policy (IFAU) and UCFS) |
| Abstract: | Several papers examine how firms react to dividend tax reforms. But can tax reforms affect firm behavior without even occurring? An increase in the dividend tax on shares of Swedish closely-held corporations, scheduled for January 1, 2018, was canceled at short notice. In a difference-in-difference setting, we examine how firms reacted to the government’s announced reform plans. We find that dividend payments increased in the “pre-reform years” and declined sharply in 2018, especially for cash-rich firms. This led to a reduction in the cash holdings, with potential implications for firm activity. |
| Keywords: | Owner level taxes; tax planning; investments |
| JEL: | G35 H32 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:umnees:1040 |