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on Public Economics |
| By: | Clemens Fuest (CPE, University of Cologne and IZA); Andreas Peichl (CPE, University of Cologne); Thilo Schaefer (CPE, University of Cologne) |
| Abstract: | The success of the flat rate tax in Eastern Europe suggests that this concept could also be a model for the welfare states of Western Europe. The present paper uses a simulation model to analyse the effects of revenue neutral flat rate tax reforms on equity and efficiency for the case of Germany. We find that a flat rate tax with a low tax rate and a low basic allowance yields positive static welfare effects amounting to approximately 1.8 per cent of income tax revenue but increases income inequality. The increase in income inequality can be avoided by combining a higher tax rate with a higher basic allowance. But in this case the efficiency gains vanish. We conclude that, due to their limited efficiency effects and their problematic distributional impact, flat tax reforms are unlikely to spill over to the welfare states of Western Europe. |
| Keywords: | flat tax reform, equity, efficiency, distribution, welfare |
| JEL: | D31 D60 H20 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3142&r=pbe |
| By: | Commendatore, Pasquale; Kubin, Ingrid; Petraglia, Carmelo |
| Abstract: | We assess whether and how differences in productive public expenditure impacts on industrial location. Since productive public expenditure and taxation affect in opposite direction industrial location, it is not straightforward that following an increase in productive public expenditure in a region, that region will necessarily enjoy stronger agglomeration. As a major contribution to the literature, we consider jointly two effects arising from public policy: the demand effect and the productivity effect. The interplay of these two effects determines the final impact on the spatial distribution of firms. The result is influenced by the proportion in which tax payers of the two regions contribute to the financing of public expenditure. |
| Keywords: | economic geography; public expenditure; footloose capital |
| JEL: | F20 H5 R12 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5824&r=pbe |
| By: | Serven, Luis |
| Abstract: | Solvency is an intertemporal concept, relating to the present value of revenues and expenditures, and encompassing both assets and liabilities. But the standard practice among policy makers, financial market participants and international financial institutions is to assess the strength of the fiscal accounts solely on the basis of the cash deficit. Short-term cash flows matter, but a preponderant focus on them can encourage governments to invest too little, especially during episodes of fiscal tightening. This has potentially adverse consequences for growth and, paradoxically, even for fiscal solvency itself. The paper offers an overview of the links between fiscal targets, public investment, and public sector solvency. After reviewing the international experience with public investment under fiscal adjustment, the paper lays out an analytical framework to illustrate the consequences of using the public deficit as a guide to solvency. The paper then discusses some alternatives to conventional cash deficit rules and their implications for investment and fiscal solvency. |
| Keywords: | Debt Markets,Public Sector Expenditure Analysis & Management,Access to Finance,,Public Sector Economics & Finance |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4382&r=pbe |
| By: | Kene Boun My (BETA-Theme, Louis Pasteur University, Strasbourg (France)); François Cochard (Toulouse School of Economics, LERNA (France)); Anthony Ziegelmeyer (Max Planck Institute of Economics, Strategic Interaction Group, Jena (Germany)) |
| Abstract: | Our objective in this paper is to assess the acceptability of the ambient tax. Concretely, we ask subjects to choose between (A) an ambient tax and (B) an individual tax system. In case (A), they actually participate in a game in which their payoff depends on all participants' decisions and on natural variability as would be the case in the real world if an ambient tax was implemented. In case (B) they simply earn a sure payoff, which is supposed to reflect their maximal profit under the individual tax system. We take the percentage of agents preferring the ambient tax to a given sure payoff level as an indicator of the acceptability of the ambient tax given this sure payoff level. Our experimental results mitigate the common belief that ambient taxes are totally unacceptable. If the "sure" alternative to the ambient tax policy is very costly for the polluters, for example because it involves high inspection costs, polluters might eventually prefer being liable to an ambient tax. |
| Keywords: | Nonpoint Source Pollution; Group Decision Making; Experiments; Acceptability of fiscal instruments. |
| JEL: | C92 H3 Q5 |
| Date: | 2007–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-081&r=pbe |
| By: | Richard Bird; Eric Zolt (Eric Zolt, UCLA Richard Bird, Professor Emeritus of Economics and Senior Fellow, Institute of Municipal Finance and Governance.) |
| Abstract: | We consider in this paper how emerging countries may in practice best design and develop tax policies, given the complex economic and political environments they face. After an overview of what tax systems look like around the world, we discuss the principal objectives that countries may attempt to achieve through tax policy. We conclude by considering the broad political economy context within which tax policy and development issues must be designed and implemented. Our aim is to set out some of the basic issues facing tax policy in emerging countries and to outline some key elements that should be considered in designing the best feasible tax structure for any particular country at a particular time. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ttp:itpwps:0707&r=pbe |
| By: | Coleman, Stephen |
| Abstract: | This research note reports the results of a follow-up experiment conducted to validate an earlier experiment showing that if taxpayers overestimate the prevalence of tax evasion, their voluntary compliance can be increased by informing them about the true rate of cheating. The result confirms that tax compliance is influenced partly by social conformity with perceived social norms against cheating. The experiments were done by the Minnesota Department of Revenue in 1995 and 1996, but only the first experiment has been publicly reported to date (Coleman, 1996). |
| Keywords: | Tax compliance; experiment; social norms; social conformity |
| JEL: | C9 Z1 H2 H26 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5820&r=pbe |
| By: | Ruud de Mooij |
| Abstract: | European governments aim to raise labour supply, cut unemployment and, at the same time, maintain social cohesion. Yet, economists have stressed the trade-off between these objectives. This paper reviews the key policy insights from optimal tax theory to identify options for reform in the tax-benefit system that can potentially improve the equity-efficiency trade-off. Using a comprehensive applied general equilibrium model, we then explore whether reforms along these lines in the actual Dutch tax-benefit system will raise employment without sacrificing equality. The analysis reveals that selective tax relief for elastic secondary earners and low-skilled workers have this potential. A flat income tax structure - possibly combined with a negative income tax - worsens the equity-efficiency trade-off. |
| Keywords: | Tax-benefit system; Labour supply; Unemployment; the Netherlands; Applied general equilibrium |
| JEL: | D31 D58 H24 J22 J68 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:88&r=pbe |
| By: | van der Hoek, M. Peter; Radloff, Sarah. E. |
| Abstract: | This paper compares owner-occupied housing tax regimes in the Netherlands and the other countries in the EU-15. The Nether-lands appears to stand apart in two respects. First, in Luxembourg and the Netherlands owner-occupiers have to include an imputed rental income in their taxable income. Second, in the Netherlands, the tax-deductibility of mortgage interest payments is almost unre-stricted. The tax regime of owner-occupied homes increasingly erodes the personal income tax base in the Netherlands, so that higher tax rates are needed to collect a given amount of revenue. However, elimination or reduction of the mortgage interest deduction can only be realized gradually. Due to a lack of data both within the various tax regimes and across time periods, a comprehensive multivariate time-series comparison among the various tax regimes in the EU-15 is not pos-sible. Thus, the statistical analysis is limited to bivariate compari-sons. |
| Keywords: | owner-occupied housing; mortgage interest deduction; imputed rental income |
| JEL: | H2 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5876&r=pbe |
| By: | Bargain O; Callan T |
| Abstract: | To assess the impact of tax–benefit policy changes on income distribution over time, we suggest a methodology based on counterfactual simulations. We start by decomposing changes in inequality/poverty indices into three contributions: reforms of the tax–benefit structure (eligibility rules, tax rate structure, etc.), changes in nominal levels of both market incomes and tax–benefit parameters (e.g. benefit amounts, tax bands), and all other changes in the underlying population (including market income inequality and demographic composition). Then, the decomposition helps to extract an absolute measure of the impact of tax–benefit changes on inequality when evaluated against a distributionally–neutral benchmark, i.e. a situation where tax–benefit parameters are adjusted in line with income growth. We apply this measure to assess recent policy changes in twelve European countries. Finally, the full decomposition allows quantifying the relative role of policy changes compared to all other factors. We provide an illustration on France and Ireland and check the sensitivity of the results to the decomposition order. |
| Keywords: | Tax-benefit policy, inequality, poverty, decomposition, microsimulation. |
| JEL: | H23 H53 I32 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em5/07&r=pbe |
| By: | A. Gomez-Ibanez, Jose |
| Abstract: | Frustration with the performance of State-owned enterprises (SOEs) has led to two rounds of reform: the first round, from the 1960s through the 1980s, attempted to improve SOE performance while maintaining public ownership while the second, beginning in the late 1980s, viewed privatization as the answer. Interest in the earlier round of reform has increased recently as controversy has slowed or halted privatization in many countries, especiall y for SOEs providing infrastructure services that are basic to everyday life and are thought to have elements of monopoly. This paper reexamines the earlier round of reforms, focusing particularly on efforts to increase the firms ' capacity with infusions of human and physical capital, to strengthen managerial incentives through performance contracts and corporatization and to alter the mix of political and economic forces that impinge on the firm by strengthening the involvement of taxpayers, customers or private investors. The review suggests that these earlier approaches generated only modest success but that some of them, selectively applied, may be helpful in improving the performance of infrastructure firms that remain in public hands. |
| Keywords: | Debt Markets,Emerging Markets,Microfinance,Private Participation in Infrastructure,E-Business |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4391&r=pbe |