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on Public Economics |
| By: | Keller, Sara; Schanz, Deborah |
| Abstract: | This paper develops a new tax measure - the Tax Attractiveness Index - reflecting the attractiveness of a country's tax environment and the tax planning opportunities that are offered. Specifically, the Tax Attractiveness Index covers 16 different components of real-world tax systems, such as the statutory tax rate, the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provision, the double tax treaty network, thin capitalization rules, and controlled foreign company (CFC) rules. We develop methods to quantify each tax factor. The Tax Attractiveness Index is constructed for 100 countries over the 2005 to 2009 period. Regional clusters in the index as well as in the application of certain tax rules can be observed. The evaluation of individual countries based on the index corresponds - but is not totally identical - with the OECD's black respectively grey list. By comparing the Tax Attractiveness Index with the statutory tax rate, we reveal that even high tax countries offer favorable tax condi-tions. Hence, the statutory tax rate is not a suitable proxy for a country's tax climate in any case since countries may set other incentives to attract firms and investments. -- |
| Keywords: | tax measure,tax attractiveness,tax planning,multinational company |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:143&r=pbe |
| By: | Salvador Barrios (European Commission); Jonathan Pycroft (European Commission); Bert Saveyn (European Commission) |
| Abstract: | One key objective of tax-based fiscal consolidations which is too often disregarded in public debate is to minimise economic distortions. This paper uses a computable general equilibrium model to gauge these potential distortions by calculating the marginal cost of public funds (MCF) for EU member states. We consider two specific tax categories which are often proposed as good candidates for efficiency-enhancing tax shifting policies: labour and green taxes. Our analysis suggests that the economic distortions provoked by labour taxes are significantly larger than for green taxes. This result suggests that a green-taxes oriented fiscal consolidation would be preferred to a labour-tax oriented one (assuming that both tax increases would yield the same tax revenues). This holds for all EU member states modelled and despite the fact that potential welfare enhancement through pollution abatement are cancelled-out. Nevertheless, this result is slightly less strong when one considers the spillover effects between countries, which are more pronounced (in relative terms) for green taxes. This suggests that the use of green taxes for fiscal consolidation would be more effective were there to be close coordination across EU countries. In addition the efficiency losses associated with labour taxes are also likely to be greater when labour markets are less flexible (from an efficiency-wage perspective), a result also found to a small extent for green taxes. This raises the possibility that undertaking structural reforms (especially in the labour market) would help to minimize the efficiency losses entailed by tax-driven fiscal consolidations. |
| Keywords: | European Union, Taxation, labour taxation, environment, marginal cost public funds |
| JEL: | H21 H23 H24 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0035&r=pbe |
| By: | Baskaran, Thushyanthan |
| Abstract: | This paper exploits an exogenous reform of the local fiscal equalization scheme in the German State of North Rhine-Westphalia to identify tax mimicking by municipalities in the neighboring state of Lower Saxony. The spatial lag regressions provide no evidence for the existence of strategic interactions in municipal business and property taxes. In contrast, traditional spatial lag regressions that rely on variation in neighbors' demographic, political, or economic characteristics for identification provide strong evidence for strategic interactions. This pattern of results indicates that most of the extant literature overestimates the importance of local tax mimicking. -- |
| Keywords: | Tax mimicking,business tax,property tax,intergovernmental equalization |
| JEL: | H20 H71 H77 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:157&r=pbe |
| By: | Karel Mertens |
| Abstract: | This paper estimates the dynamic effects of marginal tax rate changes on income reported on tax returns in the United States over the 1950-2010 period. After isolating exogenous variation in average marginal tax rates in structural vector autoregressions using a narrative identification approach, I find large positive effects in the top 1% of the income distribution. In contrast to earlier findings based on tax return data, I also find large effects in other income percentile brackets. A hypothetical tax reform cutting marginal rates only for the top 1% leads to sizeable increases in top 1\% incomes and has a positive effect on real GDP. There are also spillover effects to incomes outside of the top 1%, but top marginal rate cuts lead to greater inequality in pre-tax incomes. |
| JEL: | E6 E62 H2 H24 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19171&r=pbe |
| By: | Bernardi, LUIGI |
| Abstract: | The relative merits of direct vs. indirect taxes have been largely debated since the advent of public finance theory. The current phase of the discussion concerns the relative ability of these two kinds of taxes to creating a more growth-friendly environment. The prevailing view favours indirect taxation, and suggests a shift of the fiscal burden towards indirect taxes, especially those on consumption. We shall be looking only briefly at this last question, as this paper has two other principal aims. The first aim is to evaluate the entity of the said tax shift over the last decade across Euro Area (EA-17) member countries. Our conclusion is that a “true” tax shift has not been as widespread and large as the EU Commission believes. Secondly, among the most widely-debated issues concerning the tax shift, we are going to examine the contrasting short-term impacts on the economy resulting from it, and we shall outline the possible risk that, in the short term, this tax shift may exacerbate the economic slump spreading across the European Union, particularly as an effect of the general adoption of restrictive fiscal policies by almost all member countries |
| Keywords: | Direct taxes, indirect taxes, Euro Area |
| JEL: | H2 |
| Date: | 2013–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47877&r=pbe |
| By: | Miriam Hortas-Rico (Universidad Complutense de Madrid, Spain.); Jorge Onrubia (Universidad Complutense de Madrid); Daniele Pacifico (Department of the Treasury – Italian Ministry of Economy and Finance; Centre for North-South Economic Research, University of Cagliari, Italy) |
| Abstract: | Local income data is a key element to analyze residents’ standard of living and wellbeing as well as an important economic indicator, very used in a wide range of studies related to regional convergence, urban economics, fiscal federalism, housing and spatial welfare analysis. Despite its importance, there is a lack of official data on local incomes and, most importantly, on local income distributions. In this paper we use official data on personal income tax returns and a reweighting procedure to derive a representative income sample at the local level. Unlike previous attempts in the literature to get local income estimates, the results obtained allow us to derive not only an average value of income but its local distribution, a valuable and informative tool for distributional and income inequality analysis. We apply this methodology to Spanish micro-data and illustrate its potential use in income inequality analysis by means of computed Gini and Atkinson coefficients for a set of municipalities. |
| Keywords: | local income distribution, sample reweighting, income inequality |
| Date: | 2013–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1314&r=pbe |
| By: | Nathaniel Hendren |
| Abstract: | This paper provides a generic framework for evaluating the welfare impact of government policy changes towards taxes, transfers, and publicly provided goods. The results show that the behavioral response required for welfare measurement is the causal impact of each agent’s response to the policy on the government’s budget. A decomposition of this response into income and substitution effects is not required. Because these desired elasticities vary with the policy in question, I term them policy elasticities. I also provide an additivity condition that yields a natural definition of the marginal costs of public funds as welfare impact of a policy per dollar of its cost to the government budget. Finally, I use the model, along with causal estimates from existing literature, to study the welfare impact of additional redistribution by increasing the generosity of the earned income tax credit financed by an increase in the top marginal income tax rate. I show existing causal estimates suggest additional redistribution is desirable if and only if providing an additional $0.44 to an EITC-eligible single mother (earning less than $40,000) is preferred to providing an additional $1 to a person subject to the top marginal tax rate (earning more than $400,000). |
| JEL: | D6 H0 I3 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19177&r=pbe |
| By: | John Hills |
| Keywords: | social policy, benefits, distributions of economic outcomes, income poverty, tax and benefit policy, wealth inequality |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:spccwp:05&r=pbe |
| By: | Yeti Nisha Madhoo; Shyam Nath |
| Abstract: | The revenue objective to cover the identifiable costs (in full or partly) is important with respect to both fees and charges. All revenue sources -- taxes, fees, fines and user charges -- are instruments of cost recovery to meet the financial obligations of public administration and the public and private supply of public goods and services. In the case of publicly supplied local goods, such as public administration, public education, health services, street lighting and sanitation, cost recovery may not be the dominant objective. But cost recovery is tremendously significant in the case of privately supplied local public goods, such as water supply, sewerage, electricity and telephone. In recent years, user fees and charges have gained significance at the sub-national level mainly because of hard local budget constraints. Recession resulted in drastic cuts in intergovernmental transfers and reduced access to market loans. According to the 2009 International City and County Management (ICMA) State Survey in the US, for instance, 46 percent of reporting local governments increased existing fees by 23 percent and added new levies for additional funds (Ebel and Petersen, 2012). While these trends are encouraging, there is no systematic research to assess the efficacy of local government in collecting fees and user charges vis-à-vis performance of other institutional arrangements such as off- budget supply and privatization. The structure of this paper is as follows. Section 2 discusses the principles and practices of user fees and charges and their revenue potential. Section 3 analyzes factors adversely impacting the growth of beneficiary charges in local government budgets, including the centralization of revenue, intergovernmental fiscal transfers, and alternative fiscal strategies such as tax earmarking and piggybacking. Section 4 examines the trade-off between budgetary and privatization regimes of water supply and the efficacy of cost recovery policies. Section 5 examines the implications of water utility policies for full and partial cost recovery vis-à-vis the marginal cost of public funds. This section also includes an analysis of the impact of willingness to pay for water on the marginal cost of public funds. An empirical analysis is carried out using the results of a contingent valuation survey in Mauritius and estimating an empirical model for measuring the welfare effects of water charges in terms of the willingness to pay and the cost of providing water. When willingness to pay exceeds the average cost of supplying water, the marginal cost of public funds is reduced, thus increasing the revenue potential of water charges. The last section concludes with policy implications. |
| Date: | 2013–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1317&r=pbe |
| By: | Richard M. Bird (University of Toronto); Eric M. Zolt |
| Abstract: | Times change. In the words of an old English ballad, some things seem to have “turned upside down” in recent years. Since 2000, Latin America has become less unequal, with lower levels of poverty and likely greater economic mobility (Lustig, Lopez-Calvo and Ortiz-Juarez 2012), assisted in part by more progressive fiscal policy (Mahon 2012). In contrast, the United States has become more unequal (Piketty and Saez 2003, 2013), while poverty has remained relatively constant (U.S. Census Bureau 2012), economic mobility has likely declined (Hungerford 2008), and tax and spending policies have become less effective in reducing inequality (Harris and Sammartino 2011). This chapter examines whether the tide has really changed in Latin America or in the United States, and, if it has, what may lie ahead for these two regions of the Americas? Do recent events portend fortune or misery? Although the primary cause of the more equal income distribution in Latin America is probably the sharp increase in growth and employment following the challenging political and economic decade of the 1990s (Gasparini and Lustig 2011), fiscal policy played at least some role. Indeed, recent Latin American experience suggests that the pessimism prevalent since the 1970s about the extent to which taxation can affect income distribution has perhaps been misguided. Economic, social and political changes can and do give rise to new norms and power configurations, which sometimes result in important changes in the social and fiscal contract underlying governance structures. |
| Date: | 2013–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1315&r=pbe |
| By: | dogru, bulent |
| Abstract: | The goal of this study is to test the implication of Mankiv’s (1987) optimal seigniorage theory suggesting that in the long run higher tax rates are associated with higher inflation rates and higher nominal interest rates for Turkish Economy using time series dataset for the time period 1980-2011.We examine the long run relationship between nominal interest rates, inflation and tax revenue. For this purpose, we estimate the Mankiw’soptimal seigniorage model for Turkish Economy with the cointegration and vector error correction methods (VECM) techniques. According to econometric result, in long run there is a causality relationship from inflation and tax revenue to nominal interest rates. However, in short run we could not find any evidence that support the causality from inflation and tax revenue to nominal interest rates |
| Keywords: | seigniorage and inflation tax, optimal seigniorage theory, Turkish economy, error correction model, cointegration analysis |
| JEL: | E6 E62 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47885&r=pbe |
| By: | Laura Wolf-Powers (University of Pennsylvania) |
| Abstract: | This paper considers employment growth and unemployment from 1990-2010 in a cross-section of cities in light of practical tools that city governments have at their disposal to provide relief. In particular, I test educational attainment (both initial levels and growth over time) and public capital investment as influences on job growth and changes in unemployment rates in 83 central cities in the United States. Change in educational attainment over time is suggestive of causing higher job growth and lower unemployment. The implication is that initiatives to attract and retain college-educated professionals and investments in increasing college attainment among incumbent residents have the potential to reduce joblessness and improve social welfare. Despite some evidence that public capital outlays led to employment growth and reduced unemployment in the 1990s, the overall association between capital outlays and labor market health is weak. Intergovernmental spending as part of the American Recovery and Reinvestment Act (ARRA), however, was found to have a positive effect on unemployment rates in 2009 and 2010. A relatively weak correlation between the two dependent variables used in the analysis—employment growth and unemployment rates—underscores the mitigating roles of migration and labor force participation in translating job creation into employment growth for members of the unemployed population. |
| Keywords: | regional labor markets, unemployment, employment policy, human capital, public capital |
| JEL: | O15 R23 J68 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:13-199&r=pbe |
| By: | Angela K. Dills; Rey Hernández-Julián |
| Abstract: | The Catholic sex abuse scandals reduced both membership and religiosity in the Catholic Church. Because government spending on welfare may substitute for the religious provision of social services, we consider whether this plausibly exogenous decline in religiosity affected several measures of the public taste towards government spending on welfare between 1990 and 2008. In places where there were more scandals, individuals state a preference for less government provision of social services. In contrast, a higher level of abuse is also associated with an increase in voting for Democratic candidates for President and state legislatures, and an increase in per capita government welfare spending, although this increase is insufficient to replace the decrease in Catholic-provided charity. |
| JEL: | H41 I38 Z12 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19169&r=pbe |
| By: | Oliver D. Hart; Luigi Zingales |
| Abstract: | We study the role of fiscal policy in a complete markets model where the only friction is the nonpledgeability of human capital. We show that the competitive equilibrium is constrained inefficient, leading to too little risky investment. We also show that fiscal policy following a large negative shock can increase ex ante welfare. Finally, we show that if the government cannot commit to the promised level of fiscal intervention, the ex post optimal fiscal policy will be too small from an ex ante perspective. |
| JEL: | E41 E51 G21 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19184&r=pbe |
| By: | CPB Netherlands (CPB Netherlands); CAPP (CAPP) |
| Abstract: | The main research question of the project is summarized as: What are the macroeconomic and distributional consequences of fiscal devaluation for a selection of countries and the EU as a whole? The selected countries are France, Italy, Spain and Austria. The project aims to perform four tasks: 1. Provide a review of the impacts of fiscal devaluations in the light of economic literature and former studies. 2. Use suitable models to analyse macroeconomic impacts of fiscal devaluation in the selected countries and do a comparative analysis of the results obtained in different countries. 3. Analyse distributional impact of fiscal devaluations with the help of models in the selected countries and link these results, if possible, to the macro-level analysis. 4. Analyse the suitability of the policy for the EU as a whole with the help of model simulations and in the light of the country-specific results. |
| Keywords: | European Union, Taxation, fiscal devaluation, redistribution |
| JEL: | H21 H23 H24 H31 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0036&r=pbe |
| By: | Dridi, Mohamed |
| Abstract: | The relationship between corruption and economic growth has been the focus of numerous studies. However, no consensus seems to exist on the mechanisms via which corruption should reduce growth. The aim of this paper is to identify the transmission channels through which corruption is likely to affect economic growth. Unlike most previous analysis in this area that used the decomposition method [Mo (2001), Pellegrini and Gerlagh (2004) and, Pellegrini (2011)], we employ a Channel Methodology [developed by Tavares and Wacziarg (2001) and applied by Wacziarg (2001) and, more recently, by Lorentzen, McMillan and Wacziarg (2008)]. This methodology based on a system of simultaneous equations to evaluate the effects of corruption on various determinants of economic growth, will allow us to show how corruption affects growth via each possible channel. Our results suggest that the negative effect of corruption on economic growth is mainly transmitted by its impact on human capital and political instability. |
| Keywords: | Corruption, Economic Growth, Simultaneous Equations |
| JEL: | C30 D73 O40 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47873&r=pbe |
| By: | A. Palestini; G. Pignataro |
| Abstract: | The purpose of this paper is to propose theoretical foundations on the impact of transfer scheme, e.g. Community Agricultural Policy, on income inequality within European Countries. First, we show that ex-post inequality (in the after-transfer distribution) may increase if either initial aggregate income or the amount of fiscal contributions are sufficiently high. Second according to welfare ordering, we characterize a multi-factor decomposition of the Atkinson index to gauge the impact of each income source on the inequality profile. Third, we introduce a methodology to construct a cooperative game played by different income factors (as net incomes and/or incoming transfers) explicitly measuring the cost of inequality across the population in terms of welfare loss. We finally rely on Banzhaf and Shapley values to determine the marginal contributions of each factor to overall inequality. |
| JEL: | D31 D63 I32 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp891&r=pbe |