|
on Public Economics |
| By: | Odd-Helge Fjeldstad; Collette Schulz-Herzenberg; Ingrid Hoem Sjursen |
| Abstract: | What are the key determinants of taxpayer compliance? And which features of citizen-state relations govern attitudes and behaviour regarding taxation? This paper examines the analytical foundation, methodological approaches and key findings of available empirical literature on taxpayer behaviour in Africa. Understanding how citizens perceive and experience taxation may provide an essential diagnostic of the political realities for tax reform. Attempts to broaden the tax base require insights into how citizens experience and perceive the tax system, whether people perceive they are paying taxes or not, what they eventually pay, their views on tax administration and enforcement, and whether and how their tax behaviour is correlated with how they perceive the state. Attitude and perception surveys of current and potential taxpayers may also help to identify perceived weaknesses of the tax system, and enable tax authorities to focus attention efficiently on high-risk categories of taxpayers. |
| Keywords: | Taxation, Tax behaviour, Compliance, Evasion, Fiscal exchange, Surveys |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:chm:wpaper:wp2012-7&r=pbe |
| By: | Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier) |
| Abstract: | Relative consumption effects or status concerns that feature jealousy (in the sense of Dupor and Liu, AER 2003) boost consumption expenditure. If consumption is financed by labour income, such status considerations increase labour supply and, hence, the tax base. A higher taxable income, in turn, can make tax evasion more attractive. We show for various specifications of preferences that the tax base effect generally dominates. Consequently, relative consumption effects tend to reduce tax evasion. This is true, irrespective of whether tax parameters are exogenous, guarantee a balanced budget or are set optimally. |
| Keywords: | Income taxes, Optimal taxation, Relative consumption, Tax evasion |
| JEL: | D62 H21 H23 H24 H26 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:201301&r=pbe |
| By: | Alpaslan Akay; Olivier Bargain; Mathias Dolls; Dirk Neumann; Andreas Peichl; Sebastian Siegloch |
| Abstract: | This paper offers a first empirical investigation of how labor taxation (income and payroll taxes) affects individuals' well-being. For identification, we exploit exogenous variation in tax rules over time and across demographic groups using 26 years of German panel data. We find that the tax effect on subjective well-being is significant and positive when controlling for income net of taxes. This interesting result is robust to numerous specification checks. It is consistent with several possible channels through which taxes affect welfare including public goods, insurance, redistributive taste and tax morale. |
| Keywords: | subjective well-being, taxation, public goods |
| JEL: | H21 H41 I38 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp526&r=pbe |
| By: | Luca Agnello (University of Palermo, Department of Economics, Business and Finance); Ricardo M. Sousa (Universidade do Minho - NIPE) |
| Abstract: | Using a statistical approach to identify fiscal adjustments, we find that fiscal consolidation appears to shorten the income gap. Fiscal austerity plans that succeed in bringing public debt to a sustainable path seem to be more likely to reduce inequality. Expansionary fiscal adjustments are particularly important to promote changes in the income distribution. |
| Keywords: | Inequality, fiscal consolidation, Kuznets curve, openness. |
| JEL: | H10 G18 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:19/2012&r=pbe |
| By: | Hirota, Haruaki; Yunoue, Hideo |
| Abstract: | The purpose of this paper is to evaluate a fiscal common-pool problem in a Japanese local government. Especially, we focus on the relationship between council size and land development expenditure of local government using a dataset of 13,989 municipalities in Japan from FY2001 to FY2006. We deal with an identification of causal effects by applying regression discontinuity design’s framework to address problem of endogeneity bias. Our results show that land development expenditure of small municipalities induce the fiscal common-pool problem over public projects. |
| Keywords: | fiscal common-pool problem; council size; government expenditure; regression discontinuity design |
| JEL: | H77 H76 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43723&r=pbe |
| By: | Luca Agnello (University of Palermo, Department of Economics, Business and Finance); Vítor Castro (Universidade de Coimbra - NIPE); Ricardo M. Sousa (Universidade do Minho - NIPE) |
| Abstract: | This paper assesses the determinants of the length of fiscal consolidation using annual data for 17 industrial countries over the period 1978-2009. Relying on a narrative approach to identify fiscal consolidation episodes, we show that fiscal variables (such as the budget deficit and the level of public debt) and economic factors (such as the degree of openness, the inflation rate, the interest rate and per capita GDP) are crucial for the fiscal consolidation process. Additionally, we employ duration analysis over a set of consolidation spells and find that, as time goes by, the likelihood of a fiscal consolidation ending is higher. However, the hazard function is not monotonic: indeed, it increases until the eighth or ninth year and starts decreasing afterwards. We also find that: (i) spending-driven consolidations are shorter than tax-driven consolidations; (ii) both types of consolidation are longer in Non-European countries than for European countries; and (iii) the size of the consolidation program (in percentage of GDP) does not significantly affect duration. All in all, our results support the importance of cuts in government spending as a way of bringing economies into a sustainable path for a public debt. Moreover, they highlight the role played by a fiscal framework that imposes discipline in governments as a device of credibly shorten the length of a fiscal consolidation episodes. |
| Keywords: | Fiscal Consolidation, Duration Analysis, Weibull Model, cubic splines. |
| JEL: | C41 E62 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:17/2012&r=pbe |
| By: | Wang, Dong |
| Abstract: | This paper investigates the conflicts which are resulted from coal tax reform in China from economic and public policy perspectives. An analytical framework involving actors, values, interests and institution has been applied. China’s central government eagers to achieve fiscal revenue increase, environmental protection and energy conversation goals by a good governance of coal system. As a traditional and feasible policy instrument, taxation is regarded for dealing with energy issues in politics and governance. However, coal tax reform proposal has induced many controversies in China. The causes of that include value conflicts of all actors, competing interests of all parties and institutional barriers of economic, politics and legislation. Therefore, the government cannot regulate coal issues only through taxation. The case reveals that good governance on coal cannot be achieved only by economic tools as the coal system contains so high stake and involves so many players. |
| Keywords: | energy tax; coal tax regime; policy instrument; energy conflicts |
| JEL: | Q38 Q32 H20 Q48 |
| Date: | 2012–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43750&r=pbe |
| By: | Vos, Klaas de |
| Abstract: | This paper uses the tax-benefit microsimulation model EUROMOD to assess how three types of tax reform would affect the state budget and the income distribution in the Netherlands. After briefly introducing the Dutch tax system and the case for and against these reforms, we investigate the effects of (1) introducing a flat income tax rate, (2) reducing the mortgage interest deduction and (3) shifting the state pension contribution to income tax, and of combining these reforms. Notably, the analysis does not include possible effects of these reforms on, e.g., the labour market and/or the housing market, but assesses the ceteris paribus effects of the reforms on the state budget and on poverty and inequality.Depending on the choice of the various parameters of the reforms both the budgetary and the distributional effects may vary widely. We show that the budget deficit may increase or decrease in combination with both increases and decreases in inequality and poverty. So, an optimal tax reform could be chosen depending on the preferences with respect to the budget and the income distribution. |
| Date: | 2012–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em9-12&r=pbe |
| By: | M. Govinda Rao (National Institute of Public Finance and Policy) |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:13/114&r=pbe |
| By: | Harry Huizinga (CentER and EBC, Tilburg University and CEPR); Johannes Voget; Wolf Wagner (CentER and EBC, Tilburg University, Duisenberg School of Finance) |
| Abstract: | In a cross-border takeover, the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders. Crosscountry differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains. A one percentage point increase in the capital gains tax rate reduces the value of equity by 0.225%. The implied average effective tax rate on capital gains is 7% and it raises the cost of capital by 5.3% of its no-tax level. This indicates that capital gains taxation is a significant cost to firms when issuing new equity. |
| Keywords: | Capital gains taxation, Cost of capital, International takeovers, Takeover premium |
| JEL: | G32 G34 H25 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1226&r=pbe |
| By: | Péter Benczúr (Magyar Nemzeti Bank (central bank of Hungary)); Gábor Kátay (Magyar Nemzeti Bank (central bank of Hungary)); Áron Kiss (Magyar Nemzeti Bank (central bank of Hungary)) |
| Abstract: | We present a new general-equilibrium behavioural microsimulation model designed to assess long-run macroeconomic and fiscal consequences of reforms to the tax and transfer system. General-equilibrium feedback effects are simulated by embedding microsimulation in a parsimonious macro model of a small open economy. We estimate and calibrate the model to Hungary, and then perform three sets of simulations. The first one explores the impact of personal income tax rate reductions which are identical in cost but different in structure. The second one compares three different tax shift scenarios, while the third one evaluates actual policy measures between 2008 and 2013. The results suggest that while a cut in the marginal tax rate of high-income individuals may boost output, it does not have a significant employment effect. On the other hand, programs like the Employee Tax Credit do have a significant employment effect. We find that policy measures since 2008 substantially increase income inequality in the long run; the contribution of the changes after 2010 are about three times that of the changes before 2010. Our results highlight that taking account of household heterogeneity is crucial in the analysis of the macroeconomic effects of tax and transfer reforms. |
| Keywords: | behavioural microsimulation, linked micro macro model, tax system, transfers |
| JEL: | H22 H31 C63 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2012/7&r=pbe |
| By: | Eugenia Panicara (Banca d'Italia); Massimiliano Rigon (Banca d'Italia); Gian Maria Tomat (Banca d'Italia) |
| Abstract: | The paper provides an analysis of cyclically-adjusted budget balances of local governments in Italy for the period 2002-07. We find that local government balances appear to be relatively sensitive to the business cycle. In particular, a shock of 1 per cent in GDP changes their resources by approximately 0.6 billion. Within the sample period, both central and local policies concerning local government budgets had a sizeable impact on local government balances in cyclically-adjusted terms. |
| Keywords: | local public finance, budget sensitivity, business cycle, tax elasticity |
| JEL: | E32 E62 H71 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_142_12&r=pbe |
| By: | Tatevik Sekhposyan (Bank of Canada); Barbara Rossi (ICREA, Duke, UPF, CREI) |
| Abstract: | This paper studies stylized empirical facts regarding the effects of unexpected changes in aggregate macroeconomic policies on consumers that are allowed to differ depending on their individual characteristics. In particular, we focus on fiscal shocks due to their important effects on consumers' welfare. We use data from the Consumption Expenditure Survey (CEX) to estimate impulse responses as well as multipliers for government spending and tax policy shocks. The main empirical finding of this paper is that unexpected fiscal shocks have substantially different effects on consumers depending on their age, income levels, and education. In particular, the wealthiest individuals tend to behave according to the predictions of standard RBC models, whereas the poorest individuals tend to behave according to standard IS-LM (non-Ricardian) models, due to credit constraints. Furthermore, government spending policy shocks tend to decrease consumption inequality, whereas tax policy shocks most negatively affect the lives of the poor, more so than the rich, thus increasing consumption inequality. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:261&r=pbe |
| By: | Saich, Tony (Harvard University) |
| Abstract: | Are China's citizens sufficiently satisfied to reduce potential challenges to the Chinese Communist Party (CCP) rule? It is reasonable to assume that if a significant percentage of citizens are more satisfied with government performance and the provision of public goods, the government will have a greater capacity for policy experimentation and enjoy a residual trust that may help them survive policy errors. This paper asks three sets of questions. The first set asks about the general levels of satisfaction with government across different levels. Second, we ask about how citizens view the performance of local officials in dealing with the public and in implementing policy. Third, we look at the level of satisfaction with the provision of a number of specific goods and services, with a more in-depth look at dealing with corruption. In particular, we compare responses among those who live in major cities, small towns and townships, and villages. Findings are based on a survey that was conducted together with Horizon Market Research Company in the fall of 2003, 2004, 2005, 2007, 2009, and 2011. The survey is a purposive stratified survey ranging from 3,800 to 4,150 respondents selected from three administrative levels: city, town, and village. Rather than a nationwide probability sample, the survey comprises a number of sites selected on the basis of three variables: geographic location, average per capita income, and population. Survey findings reveal that the new leadership that takes power through late-2012 and 2013 is likely to inherit a mixed situation. There is clearly much dissatisfaction with the performance of local government and its officials; very few have faith that the government can deal effectively with the problem of corruption. Yet, there is still good will towards the Central government that is not identified with the problems that are seen to blight the performance of those levels of government closer to the people. The surveys confirm the view of others that Chinese citizens do "disaggregate" the state and would appear to retain faith in the central government. In addition, the satisfaction with all levels of government has risen since we began the surveys in 2003. This may give the Central leadership some cushion if it makes policy errors in the future. However, as we have seen in the recent past, seemingly stable authoritarian regimes can unravel quickly, and citizen frustration can spill out onto the streets. Our survey also suggests that citizens feel that local officials are not very effective in promoting the interests of ordinary folk, but are quite adept at pursuing their own interests. It will be a notable challenge for the new leadership to bring about significant improvement in those areas of public service citizens deem most important without increasing transparency and accountability in local government. |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-051&r=pbe |
| By: | Seppo Kari; Jussi Laitila |
| Abstract: | This paper analyses the implications of a non-linear dividend tax in a life-cycle model of the firm. In the model new firms first enter markets, then grow, financing from retained earnings and finally distribute their profits in the steady state. We find that under a non-linear tax the owners prefer a smooth flow of dividends, which encourages the firms to start distributions right from the beginning. This slows down investments and leads to delayed growth of production. There is, however, an opposing effect resulting from an increase in the start-up size of the firm, which speeds growth. Simulations nevertheless show that a revenue-neutral switch from a linear to a progressive tax exacerbates production losses. We further find that this distortion can be substantially reduced by carrying forward unused tax allowances with interest. |
| Keywords: | dividend tax, progressive tax, nucleus theory, firm behavior |
| JEL: | H32 H24 G35 |
| Date: | 2012–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:41&r=pbe |
| By: | Rebiere, Therese (CNAM, Paris) |
| Abstract: | This paper studies the fiscal incidence of a fiscal reform consisting of a reduction in employers' social insurance contributions financed by a tax based on the value added. In a closed economy with two sectors calibrated thanks to the French National Accounts, a "social VAT" leads to a rise in labor incomes which is usually higher than the rise of capital incomes. In case of perfect intersector mobility of production factors, a reduction in 1 percentage point of the social contributions leads to a rise in net labor incomes which is 0:51 to 0:66 percentage point higher than the rise of the interest rate. For a low intersector mobility the gains of workers, even though unequally distributed, remain higher than that of capitalists. In an open economy when the international capital mobility is sufficiently high, workers are more inclined to suffer from the reform. |
| Keywords: | fiscal incidence, social contribution, payroll tax, tax on value added, social VAT |
| JEL: | J38 H22 H61 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7127&r=pbe |