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on Informal and Underground Economics |
| By: | Samuel Kapon (UC Berkeley); Lucia Del Carpio (INSEAD); Sylvain Chassang (Princeton University) |
| Abstract: | Tax collection with limited enforcement capacity may be consistent with both high and low delinquency regimes: high delinquency reduces the effectiveness of threats, thereby reinforcing high delinquency. We explore the practical challenges of unraveling the high delinquency equilibrium using a mechanism design insight known as “divide-and-conquer." Our preferred mechanism takes the form of Prioritized Iterative Enforcement (PIE). Taxpayers are ranked using the ratio of expected collection to capacity use. Collection threats are issued in small batches to ensure high credibility and induce high compliance. Following repayments, liberated capacity is used to issue the next round of threats. In collaboration with a district of Lima, we experimentally assess PIE in a sample of 13, 432 property taxpayers. The data both validate and refine our theoretical framework. A semi-structural model suggests that keeping collection actions fixed, PIE would increase tax revenue by roughly 10%. |
| Keywords: | Lima, Peru; prioritized iterative enforcement, divide-and-conquer, tax collection, limited government capacity |
| JEL: | H20 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:pri:cepsud:335 |
| By: | Ana Maria Santacreu; Ashley Stewart |
| Abstract: | An analysis examines how U.S. multinationals’ tax and profit-shifting strategies might affect yields on direct investment in tax havens versus G7 economies. |
| Keywords: | multinational corporations; taxes; profits; tax havens; investment |
| Date: | 2024–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:99189 |
| By: | Hayato Kato (Osaka University); Andreas Haufler (LMU Munich) |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyze tax competition among multiple tax havens and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. Upon the introduction of a moderately low GMT rate, the havens commit to the single uniform GMT rate for all multinationals. However, gradual increases in the GMT rate induce the havens, and subsequently the non-haven, to adopt discriminatory, lower tax rates for small multinationals. Our calibration exercise shows that the implementation of a 15% GMT rate results in a regime where only the havens adopt split tax rates. Upon GMT introduction, welfare and tax revenues fall in the tax havens but rise in the non-haven, yielding a positive net gain worldwide. |
| Keywords: | global minimum tax; profit shifting; multinational firms; |
| JEL: | F23 H25 H87 |
| Date: | 2024–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:516 |