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on Public Economics |
| By: | Hansjörg Blöchliger; José Maria Pinero Campos |
| Abstract: | Sub-central tax competition is the strategic interaction of tax policy between jurisdictions with the objective to attract and retain mobile tax bases. The views on tax competition differ widely: while some consider that tax competition brings sub-central fiscal policy closer to citizen?s preferences, increases the efficiency of the public sector and avoids tax and spending excesses, others argue that tax competition leads to a distorted tax structure, to growing tax rate disparities and to an under-provision of public services. The main conclusions of the paper are: tax competition is stronger on mobile taxes (corporate and personal income tax) than on immobile taxes (property tax, consumption taxes); tax rates tend to be lower in wealthier jurisdictions; there is little evidence of a “race to the bottom” with respect to tax rates and tax revenues; and inter-jurisdictional differences in tax raising capacity – or economic wealth – appear to be lower in countries with more tax competition. Governments considering tax competition “excessive” may introduce or amend fiscal equalisation; increase sub-central property taxation and reduce other sub-central taxes; or harmonise the tax bases of sub-central governments to some extent.<P>Concurrence fiscale entre administrations infranationales<BR>La concurrence fiscale entre administrations infranationales désigne l?utilisation stratégique de la politique fiscale dans le but d?attirer et de conserver les bases d?imposition mobiles. La concurrence fiscale suscite des avis partagés : certains considèrent qu?elle permet de rapprocher la politique budgétaire des administrations infranationales des attentes des citoyens, accroît l?efficience du secteur public et évite les excès en matière de prélèvements fiscaux et de dépenses, tandis que d?autres estiment qu?elle fausse la structure d?imposition, entraîne des disparités croissantes de taux d?imposition et pénalise l?offre de services publics. Les principales conclusions de ce document sont les suivantes : la concurrence fiscale est plus forte pour les bases d?imposition mobiles (impôt sur les bénéfices des sociétés et impôt sur le revenu des personnes physiques) que pour les bases immobiles (impôts fonciers, impôts sur la consommation) ; les taux d?imposition sont généralement inférieurs dans les juridictions plus riches ; il n?y a guère de signes de « nivellement par le bas » en matière de taux d?imposition et de recettes fiscales ; les différences en termes de capacités de recouvrement de l?impôt entre juridictions – ou richesse économique – sont moins marquées dans les pays où la concurrence fiscale est plus vive. Les pays qui jugent que la concurrence fiscale est « excessive » peuvent mettre en place un mécanisme de péréquation budgétaire ou, s?il existe déjà, en revoir les modalités ; alourdir la fiscalité immobilière et réduire d?autres impôts prélevés par les administrations infranationales ; ou procéder à une certaine harmonisation des bases d?imposition des administrations infranationales. |
| Keywords: | fiscal federalism, tax competition, tax autonomy, sub-national tax policy, sub-central government, fédéralisme budgétaire, Concurrence fiscale, autonomie fiscale, politique fiscale infranationale, administration infranationale |
| JEL: | H21 H71 H77 |
| Date: | 2011–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:872-en&r=pbe |
| By: | Pierre Beynet; Andrés Fuentes; Robert Gillingham; Robert Hagemann |
| Abstract: | Spain’s government has introduced ambitious consolidation measures, which should yield a sizeable improvement in discretionary fiscal efforts. Should budgetary outcomes fall short of targets, the government should stand ready to introduce further measures, as announced. Such measures could include subjecting more goods and services to the standard value added tax rate. They could also be used to fund a reduction in some social security contributions paid by employers. Once sufficient progress towards fiscal consolidation has been achieved, a further reform of the tax system towards more growth-friendly taxes should be contemplated. Spain also faces a dramatic increase in ageing-related public spending, mostly on account of pensions. The pension reform plan is welcome, but further reforms in the pension system will be necessary to contain expenditure growth. Rules on the budget balances for each level of government should be reviewed so as to induce regional governments to run larger budget surpluses when activity exceeds potential.<P>Rétablir la viabilité budgétaire en Espagne<BR>Le gouvernement espagnol a introduit des mesures d’assainissement budgétaire ambitieuses qui devraient produire une amélioration importante des efforts budgétaires discrétionnaires. Dans le cas où les objectifs budgétaires ne seraient pas atteints, les autorités devront se tenir prêtes, comme annoncé, à prendre des mesures supplémentaires, qui pourraient consister à assujettir davantage de produits et de services au taux ordinaire de la taxe sur la valeur ajoutée. Ces mesures pourraient aussi servir à financer la réduction d’une partie des cotisations patronales de sécurité sociale. Une fois la consolidation budgétaire suffisamment avancée, une nouvelle réforme du système fiscal devra être envisagée en vue de mettre davantage l’accent sur les impôts qui favorisent la croissance. L’Espagne se trouve aussi confrontée à une augmentation spectaculaire des dépenses publiques liées au vieillissement, due pour l’essentiel aux retraites. Le plan de réforme des retraites va dans le bon sens mais des réformes plus poussées du système de retraite seront nécessaires pour contenir l’accroissement des dépenses. Il conviendrait de revoir les règles relatives aux soldes budgétaires des différents niveaux d’administration afin d’inciter les autorités régionales à dégager des excédents budgétaires plus importants lorsque l’activité économique est supérieure au potentiel. |
| Keywords: | taxation, fiscal policy, fiscal federalism, pension reform, fiscal sustainability, Spain, discretionary fiscal effort, fiscalité, politique budgétaire, fédéralisme budgétaire, viabilité budgétaire, Espagne, effort budgétaire discrétionnaire, réforme des retraites |
| JEL: | H20 H21 H53 H55 H60 H77 |
| Date: | 2011–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:850-en&r=pbe |
| By: | Ryo Arawatari (yGraduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya); Tetsuo Ono (Graduate School of Economics, Osaka University) |
| Abstract: | This paper introduces an overlapping-generations model with earnings hetero- geneity and borrowing constraints. The labor income tax and the allocation of tax revenue across social security and forward intergenerational public goods are determined in a bidimensional majoritarian voting game played by successive gen- erations. The political equilibrium is characterized by an ends-against-the-middle equilibrium where low- and high-income individuals form a coalition in favor of a low tax rate and less social security while middle-income individuals favor a high tax rate and greater social security. Government spending then shifts from social security to public goods provision if higher wage inequality is associated with the borrowing constraint and a low interest-rate elasticity of consumption. |
| Keywords: | Borrowing constraint; Old-age social security; Forward intergenera- tional public goods; Ends-against-the-middle equilibrium; Wage inequality |
| JEL: | H41 H55 D72 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1126&r=pbe |
| By: | Balázs Égert |
| Abstract: | France has a track record of persistent general government deficits, partly reflecting pro-cyclical fiscal policies in upswings. This has resulted in a quadrupling of its public debt-to-GDP ratio since the 1970s to above 80% of GDP. Reducing public debt is crucial because a high level of public debt may hamper long-term growth and may have a direct impact on fiscal sustainability if long-term interest rates rise. Bringing back public debt to 60% of GDP even by 2030 would require a fiscal effort of 4 to 5 percentage points of GDP (under the assumption of unchanged long-term rates), implying permanent primary general government surpluses, which is very ambitious in view of French fiscal history since 1970. The government?s consolidation programme, which is aimed at reducing the general government deficit to 3% of GDP by 2013, represents around two-thirds of this effort. This study analyses how fiscal governance could be improved by the creation of a structural deficit rule and looks at ways the public deficit could be lowered. With France already having a very large public sector, most of the effort should be borne by holding down spending. Better control of the public wage bill, increasing public-sector efficiency and tackling age-related costs are the obvious candidates to contain expenditure. On the revenue side, there is significant potential for cutting tax expenditures. Furthermore, eliminating distortions in the tax base would encourage economic growth. |
| Keywords: | public debt, pension system, government spending, healthcare, general government deficit, fiscal rule, structural deficit, fiscal council, tax revenues, local governments, tax expenditure |
| JEL: | H19 H21 H23 H24 H25 H51 H54 H55 H62 H63 H71 H72 |
| Date: | 2011–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:858-en&r=pbe |
| By: | Takero Doi; Takeo Hoshi; Tatsuyoshi Okimoto |
| Abstract: | We construct quarterly series of the revenues, expenditures, and debt outstanding for Japan from 1980 to 2010, and analyze the sustainability of the fiscal policy. We pursue three approaches to examine the sustainability. First, we calculate the minimum tax rate that stabilizes the debt to GDP ratio given the future government expenditures. Using 2010 as the base year, we find that the government revenue to GDP ratio must rise permanently to 40%-47% (from the current 33%) to stabilize the debt to GDP ratio. Second, we estimate the response of the primary surplus when the debt to GDP ratio increases. We allow the relationship to fluctuate between two “regimes” using a Markov switching model. In both regimes, the primary surplus to GDP ratio fails to respond positively to debt, which suggests the process is explosive. Finally, we estimate a fiscal policy function and a monetary policy function with Markov switching. We find that the fiscal policy is “active” (the tax revenues do not rise when the debt increases) and the monetary policy is “passive” (the interest rate does not react to the inflation rate sufficiently) in both regimes. These results suggest that the current fiscal situation for the Japanese government is not sustainable. |
| JEL: | E62 H62 H63 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17305&r=pbe |
| By: | Sanjay K. Chugh; Fabio Ghironi |
| Abstract: | We study Ramsey-optimal fiscal policy in an economy in which product varieties are the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation in preferences, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with consumers' welfare benefit of product variety. In the most empirically relevant form of variety aggregation, socially efficient outcomes entail a substantial tax on dividend income, removing the incentive for over-accumulation of capital, which takes the form of variety. Second, optimal policy induces dramatically smaller, but efficient, fluctuations of both capital and labor markets than in a calibrated exogenous policy. Decentralization requires zero intertemporal distortions and constant static distortions over the cycle. The results relate to Ramsey theory, which we show by developing welfare-relevant concepts of efficiency that take into account product creation. |
| JEL: | E32 E62 H21 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17319&r=pbe |
| By: | Christian Bauer (University of Munich); Ronald B Davies (University College Dublin); Andreas Haufler (University of Munich) |
| Abstract: | We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of capital. Economic integration reduces the optimal capital subsidy and drives low-productivity firms from the small country's home market, replacing them with high-productivity exporters from abroad. This endogenous policy response creates a selection effect that increases the average productivity of home firms when trade barriers fall, in addition to the well-known direct effects. |
| Keywords: | corporate tax reform, trade liberalization, firm heterogeneity |
| Date: | 2011–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201115&r=pbe |
| By: | Claude Giorno |
| Abstract: | Adequate and well-functioning infrastructure is a key ingredient to growth and well-being. The benefits to activity of efficient spending in energy, water, transport and communication sectors go well beyond their contribution to capital accumulation. Good infrastructure facilitates trade, bolsters market integration and competition, fosters the dissemination of ideas and innovations and enhances access to resources and public services. These benefits are particularly important for Australia because of its size, the geographical dispersion of its population and production centres, and its remoteness from other markets. Nevertheless, Australia has an important infrastructure deficit. This is in part due to underinvestment in the 1980s and 1990s, while the rebound in capital spending at the beginning of the 2000s has been insufficient to deal with capacity shortages exacerbated by the strong demand generated by the mining boom, expected population growth, technological progress and environmental concerns. To ease these shortages, the authorities have put bolstering infrastructure to the top of their economic policy agenda. This entails greater government expenditure in this area, but also structural reforms to optimise public and private investment choices and the use of existing facilities with better regulation. This chapter reviews the state of Australia’s infrastructure and the government’s action programme.<P>Répondre aux besoins d'infrastructures en Australie<BR>Des infrastructures adéquates et fonctionnant bien sont essentielles pour la croissance et le bien-être. Des dépenses bien gérées dans les secteurs de l’énergie, de l’eau, des transports et des communications influencent positivement l’activité au delà de leur contribution à l’accumulation du capital. Elles facilitent les échanges, renforcent l’intégration des marchés et la concurrence, permettent la diffusion des idées et des innovations et améliorent l’accès aux ressources et aux services publics. Ces bénéfices sont particulièrement importants dans le cas de l’Australie en raison de sa taille, de la dispersion géographique de sa population et de ses centres de productions ainsi que leur éloignement des autres marchés. Le pays est pourtant confronté à un déficit d’infrastructures. Celui-ci est du en partie à un sous-investissement au cours des décennies 1980 et 1990. Le rebond des dépenses en capital au début des années 2000 a été insuffisant pour faire face au manque de capacités exacerbé par la hausse de la demande générée par le boom des produits miniers, la progression attendue de la population, les progrès technologiques et les préoccupations environnementales. Pour réduire ces tensions, les pouvoirs publics ont placé le renforcement des infrastructures en haut de leur agenda de politique économique. Ceci implique un accroissement des dépenses publiques dans ce domaine, mais aussi des réformes structurelles visant à optimiser les choix d’investissements publics et privés et l’utilisation des équipements existants grâce à une meilleure régulation. Ce chapitre passe en revue la situation du secteur des infrastructures en Australie et le programme d’action du gouvernement. |
| Keywords: | productivity, network industries, infrastructure, productivité, industrie de réseau, infrastructure |
| JEL: | D23 H41 H43 H54 L33 L97 L98 |
| Date: | 2011–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:851-en&r=pbe |
| By: | Martinho, Vítor João Pereira Domingues |
| Abstract: | The aim of this paper is to present a further contribution, with panel data, to the analysis of absolute convergence, associated with the neoclassical theory, and conditional, associated with endogenous growth theory, of the sectoral productivity at regional level (NUTs III, from 1995 to 1999). They are also presented empirical evidence of conditional convergence of productivity, for each of the economic sectors of the NUTS II of Portugal, from 1995 to 1999. The structural variables used in the analysis of conditional convergence is the ratio of capital/output, the flow of goods/output and location ratio. With this work we try, also, to analyse the agglomeration process in the Portuguese regions, using the New Economic Geography models. |
| Keywords: | convergence; new economic geography; Portuguese regions |
| JEL: | O18 C23 R12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32920&r=pbe |