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on Public Economics |
| By: | Braun, Julia; Weichenrieder, Alfons |
| Abstract: | Since the mid-1990s, countries offering tax systems that facilitate international tax avoidance and evasion have been facing growing political pressure to comply with the internationally agreed standards of exchange of tax information. Using data of German investments in tax havens, we find evidence that the conclusion of a bilateral tax information exchange agreement (TIEA) is associated with fewer operations in tax havens and the number of German affiliates has on average decreased by 46% compared to a control group. This suggests that firms invest in tax havens not only for their low tax rates but also for the secrecy they offer. |
| Keywords: | tax havens,tax information exchange agreements,location decisions,international taxation |
| JEL: | F21 F23 H87 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15015&r=pbe |
| By: | Antonio Acconcia (Università di Napoli Federico II and CSEF); Claudia Cantabene (Seconda Università di Napoli) |
| Abstract: | In concurrence with the recent credit crisis, the Italian government tried to stimulate R&D expenditures through tax credit. We rely on this policy to identify the firm response to an exogenous countercyclical fiscal shock. Large heterogeneity by the size of cash is observed for firms in traditional industries. The tax credit caused higher expenditures for firms with relative large cash holdings. For firms characterized by low levels of cash, the stimulus was instead mainly useful to counteract the negative effects of the credit crunch. No impact is observed among high-tech firms consistent with their tendency to smooth R&D. Our findings complement those on household response to tax rebate in US and Italy, offering new evidence for evaluating fiscal stimulus programmes. Classification-E21, E62 |
| Keywords: | Crisis, Fiscal Stimulus, Investment-cash Sensitivity, Quasi-experiment, R&D |
| Date: | 2015–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:392&r=pbe |
| By: | Hegemann, Annika; Kunoth, Angela; Rupp, Kristina; Sureth, Caren |
| Abstract: | An investment that is characterized by exit flexibility requires both decisions on investment and holding period. As selling an investment often leads to tax-liable capital gains and capital gains crucially depend on the duration of an investment we investigate the impact of capital gains taxation on the holding period under three different tax systems. In our analytical investigation we examine whether there is an optimal exit time and if there is no optimal exit time, what would be an appropriate time of sale. Moreover, we determine the worst exit time which should be avoided by investors. We find that while often an immediate sale is optimal longer holding periods may be beneficial under certain conditions. Beyond the well-known impact of the retention policy we clarify that the minimal holding period particularly depends on the degree of income and corporate tax integration. We find, e.g., a high retention rate to extend the minimum holding period under a shareholder relief tax system but is likely to accelerate sales under a classic corporate tax system. These results help to anticipate the economic implications of capital gains taxes on investment. Obviously, depending on the underlying tax system the after-tax profitability of long-term and sustainable investments is particularly affected by capital gains taxes. These results are interesting for both investors and tax politicians. |
| Keywords: | Capital Gains Taxation,Holding Period,Exit Flexibility,Investment Decisions,Timing Decisions |
| JEL: | H20 H21 H25 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:183&r=pbe |
| By: | Danny Yagan |
| Abstract: | Policymakers frequently propose to use capital tax reform to stimulate investment and increase labor earnings. This paper tests for such real impacts of the 2003 dividend tax cut—one of the largest reforms ever to a U.S. capital tax rate—using a quasi-experimental design and a large sample of U.S. corporate tax returns from years 1996-2008. I estimate that the tax cut caused zero change in corporate investment, with an upper bound elasticity with respect to one minus the top statutory tax rate of .08 and an upper bound effect size of .03 standard deviations. This null result is robust across specifications, samples, and investment measures. I similarly find no impact on employee compensation. The lack of detectable real effects contrasts with an immediate impact on financial payouts to shareholders. Economically, the findings challenge leading estimates of the cost-of-capital elasticity of investment, or undermine models in which dividend tax reforms affect the cost of capital. Either way, it may be difficult for policymakers to implement an alternative dividend tax cut that has substantially larger near-term effects. |
| JEL: | G31 G35 G38 H25 H32 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21003&r=pbe |
| By: | Cremer, Helmuth; Lozachmeur, Jean-Marie; Maldonado, Dario; Roeder, Kerstin |
| Abstract: | This paper studies the design of couples’ income taxation when consumption and labor supply decisions within the couple are made by maximizing a weighted sum of the spouses’ utilities; bargaining weights are given but specific to each couple. Information structure and labor supply decisions follow the Mirrleesian tradition. However, while the household’s total consumption is publicly observable, the consumption levels of the individual spouses are not observable. With a utilitarian social welfare function we show that the expression for a spouses’ marginal income tax rate includes a “Pigouvian” (paternalistic) and an incentive term. The Pigouvian term favors a marginal subsidy (tax) for the high-weight (low-weight) spouse, whose labor supply otherwise tends to be too low (high). The sign and the magnitude of the incentive term depends on the weight structure across couples. In some cases both terms have the same sign and imply a positive marginal tax for the low-weight spouse (who may be female) and a negative one for the high-weight spouse (possibly the male). This is at odds with the traditional Boskin and Sheshinski results. Our conclusions can easily be generalized to more egalitarian welfare functions. Finally, we present numerical simulations based on a calibrated specification of our model. The calculations confirm that the male spouse may well have the lower (and possibly even negative) marginal tax rate. |
| Keywords: | Couples’ income taxation, household bargaining, optimal income taxation, household labor supply. |
| JEL: | D10 H21 H31 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:29001&r=pbe |
| By: | Nils aus dem Moore; Tanja Kasten; Christoph M. Schmidt |
| Abstract: | We contribute to the empirical literature on the effective incidence of corporate income taxation by using the German Business Tax Reform of the year 2000 (GBTR 2000) as a natural experiment. Its effect on wages in the manufacturing sector is identified by means of a difference-in-differences analysis that uses French fi rms as comparison group. We provide evidence that GBTR 2000 led to a significant and sizeable wage effect. For 2001, the first year after GBTR 2000 took eff ect, we estimate a short-run effect that implies a wage increase of 7.9 percent. Due to the dynamic nature of the empirical model used, the incidence effect grows gradually over time during the evaluation period. |
| Keywords: | Corporate income taxation; tax reform; tax incidence; profit taxation; wages; difference-in-differences |
| JEL: | H22 H25 J31 J38 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0532&r=pbe |
| By: | Nils aus dem Moore |
| Abstract: | We contribute to the empirical literature on the debt bias of corporate income taxation through a micro-econometric evaluation of the so-called ACE corporate tax reform in Belgium based on firm-level accounting data. We interpret the tax reform that came into effect in January 2006 as an economic quasi experiment. We identify its causal impact on the leverage ratio of Belgian corporations by means of a difference-in-differences (DiD) approach, using corporations from the UK as comparison group. Our results document that the ACE reform led to a systematic pattern of heterogeneous effects on the capital structure of Belgian corporations, as the estimated reduction of the leverage ratio is most pronounced for big firms. Estimation of quantile treatment effects further reveals that reform effects get monotonically larger across the distribution of firm leverage. Finally, we provide evidence of sectoral heterogeneity with significant effects observed for capital-intensive but not for labor-intensive sectors. |
| Keywords: | Corporate income taxation; financial structure; debt bias; allowance for corporate equity; difference-in-differences |
| JEL: | H25 H32 H22 G32 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0533&r=pbe |
| By: | Freddy Heylen; Renaat Van de Kerckhove (-) |
| Abstract: | We construct an overlapping generations model for an open economy where hours worked, human capital accumulation, income and welfare are all endogenous. Within each generation we distinguish individuals with high, medium or low innate ability. These differences in ability explain inequality in income and welfare. The composition of fiscal policy plays a central role in our model. The government sets tax rates on labor, capital and consumption. It spends its revenue mainly on goods, nonemployment benefits and pensions. We find that our calibrated model’s predictions match the main facts quite well in a sample of 13 OECD countries. We then use the model to investigate optimal changes in taxes and non-employment benefits if the objective is not only to improve aggregate equilibrium employment, output (income) and welfare, but also to reduce intergenerational and intragenerational welfare inequality. Our results strongly prefer an overall reduction of nonemployment benefits to finance a combined decrease of labor tax rates on older workers and on all low-wage earners. |
| Keywords: | heterogeneous ability, employment by age, human capital, fiscal policy, welfare inequality, overlapping generations |
| JEL: | E62 H5 I28 J22 J24 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:14/898&r=pbe |
| By: | Nils aus dem Moore |
| Abstract: | We contribute to the empirical literature on the effective incidence of corporate income taxation. We focus on the so-called direct incidence via the wage bargaining process. Building on the innovative framework of Arulampalam, Devereux and Maffini (2012), we analyze the importance of various dimensions of heterogeneity at the firm-level. In particular, we investigate the distinct effects of (i) firm size, (ii) level of profitability, and (iii) competition intensity across (iv) different economic sectors. Furthermore, we investigate the relative importance of the surrounding institutional setting. To this end, a firm-level within-country approach is pursued separately for two different economies, namely France and the United Kingdom, which can be regarded as polar cases with respect to the relevant features of the wage-setting process. However, in many respects, we find surprisingly similar results for both countries. Thereby, this paper also adds to the literature by providing new insights on the degree to which results from previous single-country studies can possibly be generalized. |
| Keywords: | Corporate income iaxation; profit taxation; tax incidence; wages; difference-in-differences |
| JEL: | H22 H25 J31 J38 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0531&r=pbe |
| By: | Avram, Silvia; Militaru, Eva |
| Abstract: | We investigate the impact of the Romanian and Czech family policy systems on the income distribution and poverty risk of families with children. We focus on separating out the effects of the policy design itself, size of the benefits and the interaction between policies and population characteristics. We find that interactions between population characteristics, the wider tax benefit system and child related policies are pervasive and large. Both population characteristics and the wider tax-benefit environment can dramatically alter the antipoverty effect of a given set of policies. |
| Date: | 2015–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em4-15&r=pbe |
| By: | Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | This paper surveys tax haven legislation and links the literature on tax havens to the literature on asymmetric information. I argue that the core aim of tax haven legislation is to create private information (secrecy) for the users of tax havens. This leads to moral hazard and transaction costs in non-havens. The business model of tax havens is illustrated by using Mauritsius and Jersey as case studies. I also provide several real world examples of how secrecy jurisdictions lead to inefficient market outcomes and breach of regulations in non-haven countries. Both developed and developing countries are harmed, but the consequences seem most detrimental to developing countries. |
| Keywords: | Tax havens; secrecy; private information; moral hazard |
| JEL: | F23 H25 O10 |
| Date: | 2015–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2015_012&r=pbe |
| By: | Torben M. Andersen (Department of Economics and Business, Aarhus University, Denmark) |
| Abstract: | A key feature of the Nordic welfare model is provision of welfare services like care, education and health. They are individual entitlements, and collectively financed. It is a prerequisite that contemporary standards of services are provided; thus the public solution is not a second rate solution used only by those who cannot afford better solutions. Can the Nordic welfare model meet this objective in the future? Increasing productivity and wealth challenge this. Services tend to have lower productivity growth and thus to become more expensive (Baumol’s cost disease), but also to have a high income elasticity, and thus demands rise alongside improved material living standards (Wagner effects). The same implies to leisure, implying that tax bases may be eroded. In short, expenditures are on an upward drift and revenues on a downward trend, challenging the financial viability of the welfare model. This seems to leave a conundrum for the welfare state in the sense that the success of the model in improving living standards tends to undermine the possibility of attaining key objectives of the welfare state. It is argued that although the welfare state will be financially strained, these challenges can be met without jeopardizing the fundamental objectives of the welfare state. |
| Keywords: | Baumol, Wagner, Welfare services, productivity |
| JEL: | H5 H11 O41 |
| Date: | 2015–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2015-02&r=pbe |
| By: | Carone, Giuseppe; Berti, Katia |
| Abstract: | The aim of this paper is to illustrate the methodological approach used by the Commission services (DG ECFIN/C2) to carry out, in a systematic and harmonised way, public debt sustainability analysis (DSA) for EU Member States. Analysing recent and prospective public debt developments and risks to debt sustainability is crucial for EA countries and the EU as a whole to be able to formulate appropriate policy responses. To this aim, the Commission services (DG ECFIN) prepare on a regular basis (twice a year, following autumn and spring Commission forecasts) an internal "Debt Sustainability Monitor" report (DSM) presenting, for each Member State, a detailed public debt sustainability analysis, accompanied by the analysis of fiscal sustainability indicators. The DSM provides key information for regular budgetary surveillance. The assessment of Member States' debt developments is indeed a key component of fiscal surveillance under the Stability and Growth Pact, the European semester and the Europe 2020 strategy. Public debt dynamics is analysed in the DSM through traditional (deterministic) debt projections, accompanied by sensitivity analysis, and stochastic debt projections. Brand new tools have also been introduced in the DSA framework with the aim of ensuring a more comprehensive assessment of risks to public debt sustainability (capturing risks arising, for instance, from the structure of public debt financing and from governments' contingent liabilities). Other new tools have been introduced to make it possible to assess the realism of underlying macroeconomic assumptions. Main features of the renewed Commission's DSA framework are the following: 1) Criteria are used to identify "vulnerable" countries from the point of view of public debt sustainability. For the latter, the DSA is "enhanced" with a detailed write-up, in which the macro-fiscal assumptions used in the projections are illustrated and debt projection results, and risks to debt sustainability more broadly, are discussed. 2) The framework is designed in a way to allow for a comprehensive assessment of risks to public debt sustainability. Sensitivity analysis around baseline public debt projections, for instance, is extensive, covering downside and upside risks to the main macro-fiscal determinants of debt dynamics (possibly emerging from fiscal fatigue, tightening/relaxing of governments' financing conditions on the markets, shocks to GDP growth, inflation and the exchange rate, bank-related contingent liability shocks). 3) Variables capturing risks potentially arising from the structure of public debt (public debt by maturity, holder, currency of denomination) are integrated in the DSA through heat maps, thus usefully complementing the analysis of risks related to the projected public debt dynamics. 4) The analysis of governments' contingent liabilities features prominently in the DSA framework. An overview of overall contingent liabilities for the public sector is provided based on most recent data on state guarantees. Contingent liability risks arising from the banking sector are captured indirectly through heat maps of variables that measure banking sector vulnerabilities, as well as through estimates of the probability of bank losses hitting public finances in a simulated bank crisis. 5) Commission forecast accuracy analysis on the main macro-fiscal determinants of public debt dynamics (real GDP growth, primary balance and inflation) is included in the DSA. This analysis aims at providing some indication on whether forecasts, incorporated in baseline public debt projections, tend to be systematically biased in one direction or the other in a sign of persistent optimism or pessimism. The paper provides an accurate description of the new Commission – DG ECFIN's DSA framework, and all the analytical and reporting tools it encompasses. |
| Keywords: | Debt, sustainability, fiscal, fiscal risk, debt projection |
| JEL: | E62 H62 H63 H68 |
| Date: | 2014–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62570&r=pbe |
| By: | Baye, Francis Menjo |
| Abstract: | This paper evaluates the impact of education on measured inequality across the wage distribution using pooled records from the 2005 and 2010 Cameroon labour force surveys, wage equations and standard inequality measures. Returns to education increased mon |
| Keywords: | Cameroon, education, inequality, wages, distribution |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2015-014&r=pbe |