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on Public Economics |
| By: | Augustin Landier (Toulouse School of Economics (TSE)); Guillaume Plantin (Université Toulouse 1 Capitole) |
| Abstract: | Affluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This paper studies an economy in which an inequality-averse social planner faces agents who have access to a tax-avoidance technology with increasing returns to scale, and who can shape the risk profile of their income as they see fit. Scale economies in avoidance imply that optimal taxation is regressive at the top. This in turn may trigger excessive risk taking. |
| Keywords: | Taxation; Theoretical framework; Tax-avoidance |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/3lf2qe5um58328r4d5r2rq9noc&r=pbe |
| By: | Rathke, Alex Augusto Timm |
| Abstract: | This note proposes the segregation of independent endogenous and exogenous components of tax penalty probability to introduce a formal demonstration that enforcement and tax penalties are negatively related with income shifting. |
| Keywords: | income shifting; transfer pricing; tax enforcement, tax penalty. |
| JEL: | F23 H26 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65337&r=pbe |
| By: | Saito, Yuta |
| Abstract: | We study an OLG model in which heterogenous agents bargain over capital taxation. In our model, both of the balance of bargaining power and threat point, that standard median voter models have not considered, are endogenized. We show that the two key features are crucial determinants for political as well as economic outcomes. |
| Keywords: | Legislative bargaining; wealth inequality; capital taxation |
| JEL: | E62 H20 H30 P48 |
| Date: | 2015–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65338&r=pbe |
| By: | Annette Alstadsæter (University of Oslo); Salvador Barrios (European Commission – Joint Research Center); Gaëtan Nicodème (European Commission); Agnieszka Maria Skonieczna (European Commission); Antonio Vezzani (European Commission – Joint Research Center) |
| Abstract: | Patent boxes have been heavily debated for their role in corporate tax competition.This paper uses firm-level data for the period 2000-2011 for the top 2,000 corporate R&D investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes. We also exploit a new and original dataset on patent box features such as the conditionality on performing research in the country and their scope. We find that patent boxes have a strong effect on attracting patents mostly due to their favourable tax treatment, especially so for high quality patents. Patent boxes with a large scope in terms of tax base definition have also stronger effects on the location of patents. The size of the tax advantage offered through patent box regimes are found to deter local innovative activities while R&D development conditions tend to attenuate this adverse effect. Our simulations show that on average countries imposing such development conditions tend to grant a tax advantage which is slightly larger than optimal from a local R&D impact perspective. |
| Keywords: | Corporate taxation, patent boxes, location, patents, R&D, nexus approach |
| JEL: | F21 F23 H25 H73 O31 O34 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0057&r=pbe |
| By: | Wautabouna OUATTARA; Michaël GOUJON (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Djedje Hermann YOHOU |
| Abstract: | We examine the heterogeneous effects due to government stability of foreign aid on tax revenues in the West African Economic and Monetary Union countries over the period 1986-2010. We show that the tax effects of aid are gradual and varying across countries according to the level of government stability. The Panel Smooth Threshold Regressions indicate that at low levels of government stability, aid negatively affects tax performances. At high levels, it encourages tax collection. Consequently, we provide estimates of individual time varying coefficients of aid effects. In general, the positive effects are marked since the mid of 1990 decade. However, decomposing aid into its forms of loans, technical and non-technical grants provides nuanced results. |
| Keywords: | foreign aid, Government Stability, Tax revenue, PSTR, WAEMU |
| JEL: | O55 C23 H20 O17 F35 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1666&r=pbe |
| By: | Alex Augusto Timm Rathke |
| Abstract: | This note proposes the segregation of independent endogenous and exogenous components of tax penalty probability to introduce a formal demonstration that enforcement and tax penalties are negatively related with income shifting. JEL F23; H26. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1506.08743&r=pbe |
| By: | Chugh, Sanjay; Ghironi, Fabio |
| Abstract: | We study Ramsey-optimal fiscal policy in an economy in which product creation is the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with the 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 the stock of products. Similar intuitions determine the optimal setting of long-run producer entry subsidies. 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. The results on optimal entry subsidies provide guidance for the study of product market reforms in dynamic macro models. |
| Keywords: | Endogenous product variety; Optimal taxation; Producer entry; Wedge smoothing; Zero intertemporal distortions |
| JEL: | E20 E21 E22 E32 E62 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10674&r=pbe |
| By: | The Consortium consisting of CPB, CAPP, CASE, CEPII, ETLA, IFO, IFS, IHS |
| Abstract: | In the aftermath of the financial crisis most European countries are continuing to face employment problems. In a number of Member States government intervention has further resulted in increasing debt levels and high tax burdens overall and in particular on labour. Therefore well-targeted tax reforms seem to be in order to improve the labour market outcomes. It is often implicitly assumed that a decrease on the employee side, i.e. in the personal income tax rate or the employee part of social security contribution, leads to a higher labour supply. Similarly, a decrease in the employer labour taxes is often assumed to raise the demand of labour. However, the economic literature argues that in the presence of labour market imperfection economic incidence of a tax change is often different from the legal incidence. In this case the impact of a tax change on labour market outcomes depends on the interaction of the demand and the supply side of the market. This interaction is determined by the behaviou al responses of economic operators, measured by elasticities. Higher (demand or supply) elasticities will cause larger responses to tax changes, with the relatively less elastic side bearing a higher tax burden. Against this background four main goals of this study emerge. First, is to identify from the literature which labour market imperfections result in employment problems and to attribute them to the labour supply or on the labour demand side. Given the heterogeneity in the labour market situation of different groups, we also set out to identify which socioeconomic groups are most vulnerable to employment problems. The next step is to review the literature which assesses the short-run and long-run economic incidence of labour taxation. To further break down the incidence into its underlying determinants we also review the literature on the (tax) elasticities of labour supply and labour demand. Then the literature on the influence of the economic environment on the tax incidence outcome, most notably the wage setting mechanisms and the institutional background, is reviewed. Finally the findings of the literature review are brought together in a framework of indicators to identify the potential of tax reforms to reduce tax related employment problems. |
| Keywords: | European Union, labour taxation, tax reforms |
| JEL: | H20 H29 E62 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0056&r=pbe |
| By: | Kabátek, Jan (Tilburg University, School of Economics and Management) |
| Abstract: | This dissertation contains four empirical analyses of household decision making and public policy. We use structural microeconometric methods to evaluate specific aspects of national tax systems which are targeted at partnered households. Our aim is to identify the determinants of household decision making, quantify the behavioral effects which are likely to be induced by potential reforms of current fiscal policy, and to propose reforms which would be in line with the long-term goals set forth by the national governments. <br/>The first part of this dissertation consists of two chapters which investigate the relative effects of joint and individual income taxation on the behavior of partnered households in France and Australia, respectively. The policy analysis in both chapters is targeted at quantifying the labor supply responses and revenue effects induced by a shift from joint income taxation to individual income taxation. The second part of this dissertation consists of two chapters which analyze the effectiveness of fiscal stimuli for working parents, focusing on child care subsidy and tax credit reforms in the Netherlands. The policy goal of both chapters is to determine which of the policies - the child care subsidy or the tax credit - is more effective in stimulating the female labor supply. The effectiveness is assessed firstly in a static, and subsequently also in a dynamic modeling framework.<br/> |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:8cdb178e-ad98-42e5-a7e1-b03ef7966fc7&r=pbe |
| By: | Grechyna, Daryna |
| Abstract: | This paper evaluates the impact of political frictions on fiscal policy in a sample of developed countries. We use a model of fiscal policy that features a lack of commitment by the government, political turnover, and another political friction which can be interpreted either as political polarization or as public rent-seeking. Political turnover increases public debt levels, while political polarization or public rent-seeking lead to higher public spending. We find that political frictions account for 67% of variation in government debt, 36% of variation in government spending, and 24% of variation in taxes in twenty two developed countries. |
| Keywords: | fiscal policy; political turnover; political polarization; public rent-seeking. |
| JEL: | E61 E62 H21 H63 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65266&r=pbe |
| By: | Robert Z. Lawrence (Peterson Institute for International Economics) |
| Abstract: | As shown in the 1930s by Hicks and Robinson, the elasticity of substitution (s) is a key parameter that captures whether capital and labor are gross complements or substitutes. Establishing the magnitude of s is vital, not only for explaining changes in the distribution of income between factors but also for undertaking policy measures to influence it. Several papers have explained the recent decline in labor's share in income by claiming that σ is greater than 1 and that there has been capital deepening. This paper presents evidence that refutes these claims. It shows that despite a rise in measured capital-labor ratios, labor-augmenting technical change in the United States has been sufficiently rapid that effective capital-labor ratios have actually fallen in the sectors and industries that account for the largest portion of the declining labor share in income since 1980. In combination with estimates that corroborate the consensus in the literature that s is less than 1, these declines in the effective capital-labor ratio can account for much of the recent fall in labor's share in US income at both the aggregate and industry level. Paradoxically, these results also suggest that increased capital formation, ideally achieved through a progressive consumption tax, would raise labor's share in income. |
| Keywords: | Inequality, Labor Share, Elasticity of Substitution, Labor-Augmenting Technical Change |
| JEL: | D3 D33 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp15-10&r=pbe |
| By: | Ricco, Giovanni |
| Abstract: | Can discretionary increases in government spending stimulate the economy? We answer this question by taking into account both the information flow on fiscal measures and the role played by information frictions. Using a novel set of empirical proxies for fiscal news and agents’ misperceptions, our approach identifies three types of innovations to government spending that modify the agents’ information set at different horizons: before, upon and after the actual change materialises. Borrowing from the psychological literature, we name them expected, unexpected and misexpected fiscal changes. By missing this important distinction, we show that standard identification strategies blend unexpected and misexpected changes in a way that leads to significant underestimation of the effects of fiscal policy. An application to US data reveals that once information rigidities are fully accounted for, expected fiscal changes stimulate economic activity and private investments with a cumulative output multiplier around 1.5. JEL Classification: C32, E32, E62 |
| Keywords: | fiscal foresight, fiscal shocks, government spending, government spending news, large Bayesian VARs, structural VARs, survey of professional forecasters |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20151813&r=pbe |
| By: | De Agostini, Paola; Tasseva, Iva Valentinova |
| Abstract: | Using the tax-benefit microsimulation model EUROMOD and Family Resources Survey, we investigate what would have happened to child poverty in the UK in the periods 2010/11–2015/16 and 2015/16–2020/21 under a range of different indexation scenarios of children’s benefits. We find that between 2010/11 and 2015/16 both the relative and absolute child poverty rates would have been lower if children’s benefits were uprated by RPI or if the government had introduced the Child Tax Credit uprating package it promised in 2010. Uprating children’s benefits up to 2020/21 as announced by the government in the Autumn Financial Statement in 2014 would result in real benefit cuts and increase in child poverty. However, triple lock indexation of children’s benefits would sustain their real value and would reduce child poverty rates substantially. |
| Date: | 2015–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em8-15&r=pbe |
| By: | Juan Carlos Escaniano (Indiana University); Leonardo Martinez (IMF); Francisco Roch (IMF) |
| Abstract: | We use a sovereign default model to study the eects of introducing limits to the decision- making capabilities of governments|scal rules. We show that optimal limits to the debt level vary greatly across parameterizations of the model that deliver dierent levels of debt tolerance. In contrast, optimal limits to the sovereign premium paid by the government are very similar across parameterizations. Since levels of debt tolerance are dicult to identify and vary both across countries and over time, and political constraints often force common scal rule targets across countries, these ndings indicate that sovereign-premium limits may be preferable to debt limits |
| Keywords: | Fiscal Rules, Debt Limit, Spread Limit, Default, Sovereign Default Pre- mium, Countercyclical Policy, Endogenous Borrowing Constraints, Long-term Debt, Debt Dilution, Debt Tolerance |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2015010&r=pbe |
| By: | Yann Algan (Département d'économie); Pierre Cahuc (Department of Economics); Marc Sangnier (Aix-Marseille School of Economics) |
| Abstract: | We show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces. Uncivic people support large welfare states because they expect to benefit from them without bearing their costs. But civic individuals support generous benefits and high taxes only when they are surrounded by trustworthy individuals. We provide empirical evidence for these behaviors and this twin peaks relation in the OECD countries. |
| Keywords: | Welfare State; Trust; Civism; Corruption; Redistribution |
| JEL: | H1 Z1 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/sarckf9a387pq4m0ti31l8n9q&r=pbe |