nep-pbe New Economics Papers
on Public Economics
Issue of 2016‒07‒02
fifteen papers chosen by
Thomas Andrén

  1. A data-driven procedure to determine the bunching window: An application to the Netherlands By Dekker, Vincent; Strohmaier, Kristina; Bosch, Nicole
  2. Optimal Automatic Stabilizers By McKay, Alisdair; Reis, Ricardo
  3. Fiscal multipliers in Slovak economy DSGE simulation By Juraj Zeman
  4. Impact of Infrastructure Investment on Tax: Estimating Spillover Effects of the Kyushu High-Speed Rail Line in Japan on Regional Tax Revenue By Yoshino, Naoyuki; Abidhadjaev, Umid
  5. Removing cross-border tax obstacles Organisation and practices in Member States’ tax administrations By EY
  6. Some Options for Taxation of Income from Financial Instruments in the Context of the Qualitative Characteristics of the Tax System By Malinina, Tatiana
  7. Cashless Payments and Tax Evasion By Giovanni Immordino; Francesco Flaviano Russo
  8. Do pensions foster education? An empirical perspective By Gianko Michailidis; Concepció Patxot; Meritxell Solé Juvés
  9. Optimal Inheritance Tax under Temptation By Monisankar Bishnu; Cagri S. Kumru; Arm Nakornthab
  10. Improving the Tax Relief on Personal Property By Korytin, A.V.; Shatalovà, Svetlana Sergeevna
  11. The ethics of tax accounting. Is there a conflict? By TOMA, LOREDANA OANA
  12. Public debt and aggregate risk By Desbonnet, Audrey; Kankanamge, Sumudu
  13. Optimal taxes and charges in the management and use of water resources (with particular reference to the MDB) By Webster, Tony; Mallawaarachchi, Thilak
  14. Challenges of Fiscal Policy in Emerging and Developing Economies By Raju Huidrom; M. Ayhan Kose; Franziska L. Ohnsorge
  15. Age or time-to-death – what drives health care expenditures? Panel data evidence from the OECD countries By Maciej Lis

  1. By: Dekker, Vincent; Strohmaier, Kristina; Bosch, Nicole
    Abstract: This paper presents new empirical evidence on taxpayers' responsiveness to taxation by estimating the compensated elasticity of taxable income with respect to the net-of-tax rate in the Netherlands. Applying the bunching approach introduced by Saez (2010), we find small, but clear evidence of bunching behaviour at the thresholds of the Dutch tax schedule with a precise estimated elasticity of 0.023 at the upper threshold. In line with the literature, we find much larger estimates for women and self-employed individuals, but we can also identify significant bunching behaviour for wage employed individuals which we can attribute to tax deductions for couples. We add to the bunching literature by proposing to rely on the information criteria to determine the counterfactual model, as well as developing an intuitive, data-driven procedure to determine the bunching window.
    Keywords: Elasticity of Taxable Income,Optimal Bunching Window
    JEL: H21 H24
    Date: 2016
  2. By: McKay, Alisdair; Reis, Ricardo
    Abstract: Should the generosity of unemployment benefits and the progressivity of income taxes de- pend on the presence of business cycles? This paper proposes a tractable model where there is a role for social insurance against uninsurable shocks to income and unemployment, as well as inefficient business cycles driven by aggregate shocks through matching frictions and nominal rigidities. We derive an augmented Baily-Chetty formula showing that the optimal generosity and progressivity depend on a macroeconomic stabilization term. Using a series of analytical examples, we show that this term typically pushes for an increase in generosity and progressivity as long as slack is more responsive to social programs in recessions. A calibration to the U.S. economy shows that taking concerns for macroeconomic stabilization into account raises the optimal unemployment benefits replacement rate by 13 percentage points but has a negligible impact on the optimal progressivity of the income tax. More generally, the role of social insurance programs as automatic stabilizers affects their optimal design.
    Keywords: Counter-cyclical fiscal policy; distortionary taxes.; redistribution
    JEL: E62 H21 H30
    Date: 2016–06
  3. By: Juraj Zeman (National Bank of Slovakia, Research Department)
    Abstract: In order to calculate fiscal multipliers for Slovakia, I used a small open DSGE model of Slovakia constructed by Zeman and Senaj (2009), augmented by more sophisticated fiscal sector that comprises of government expenditure components – consumption, investment and social transfers to liquidity constrained households as well as government revenue components – personal income tax, employer social contributions, VAT tax and lump-sum tax. The Slovak government has laid out a plan of public finance consolidation for the period from 2013 to 2017 in order to meet the Fiscal Compact criteria. According to fiscal multipliers calculated in this paper the consolidation will cause an aggregate loss of 2.5 % of GDP during this period.
    Keywords: Fiscal multipliers, expenditure and revenue components, DSGE simulations
    JEL: E32 E62 H20 H50
    Date: 2016–05
  4. By: Yoshino, Naoyuki (Asian Development Bank Institute); Abidhadjaev, Umid (Asian Development Bank Institute)
    Abstract: This paper analyzes the impact of infrastructure investment on tax revenues and on the regional economy by studying the effect of the Kyushu high-speed rail line (shinkansen train) in Japan. The effects of the Kyushu high-speed rail line on the economy has often been debated. We estimated its impact in the Kyushu region by using the difference-in-difference method, and compared the tax revenues of regions along the railway line with other regions that were not affected by it. Our findings show a positive impact on the region’s tax revenue following the connection of the Kyushu rapid train with large cities such as Hiroshima and Osaka. Tax revenue in the region significantly increased during the construction in 1991–2003, and dropped after the start of operations in 2004–2010. The rapid train’s impact on the neighboring prefectures of Kyushu is positive. The difference-in-difference coefficient methods reveal that corporate tax revenue was lower than personal income tax revenue during construction. However, the difference in corporate tax revenues rose after connectivity with large cities was completed. The railway’s connectivity to large cities has a significant economic impact not only in the case of Japan but also in other cases such as Uzbekistan.
    Keywords: infrastructure; railway; tax revenue; tax income; public investment; regional economy; economic development; development planning; urban development; macroeconomic analysis; Japan; Kyushu; prefecture
    JEL: H54 O11 O23 R11
    Date: 2016–06–01
  5. By: EY
    Abstract: This study analyses the various obstacles people may face and identifies existing national solutions to the major cross-border obstacles. The report subsequently identifies solutions to make the system clearer and simpler to remove disincentives to exercise cross-border activities.
    Keywords: European Union, taxation, cross-border obstacles
    Date: 2014–11
  6. By: Malinina, Tatiana (Russian Presidential Academy of National Economy and Public Administration (RANEPA), Gaidar Institute for Economic Policy)
    Abstract: The author analyses the Russian experience of the large-scale changes in tax legislation in the years 2010–2011 forming the basis for current tax regime for income from financial instruments in the context of neutrality and efficiency of the tax system.
    Keywords: Income taxation, Financial instruments, Tax neutrality, Tax efficiency
    Date: 2016–04–14
  7. By: Giovanni Immordino (Università di Napoli Federico II and CSEF); Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: Cashless payments hinder tax evasion because they build a trail for the underlying transactions. We find empirical evidence supporting this claim for Europe, showing a negative relationship between VAT evasion and the payments with credit and debit cards. We also find that using electronic cards to gather cash at ATMs, by making cash more abundant, fosters VAT evasion. Policies aimed at reducing tax evasion should therefore subsidize the direct use of electronic cards as payments, not their possession.
    Keywords: tax evasion; electronic payments.
    JEL: O17 H26
    Date: 2016–06–17
  8. By: Gianko Michailidis (Universitat de Barcelona); Concepció Patxot (Universitat de Barcelona); Meritxell Solé Juvés (Universitat de Barcelona)
    Abstract: In this paper we examine the effect of the demographic transition on public education, pension spending and the interaction between them. In particular, we investigate the theoretical prediction that the structure of PAYG pension systems, alongside population ageing, offers incentives for the working-age generation to invest in the public education of the young in order to "reap" the benefits of their higher productivity in the future, translated into higher income tax/contributions. The empirical evidence resulting from the application of the fixed effects approach to panel data for OECD countries shows that the increasing share of elderly people has non-linear effects on both retirement and education spending. The former suggests that political pressure to increase benefits turns out to have no effect when the ageing process is strong enough to compromise the fiscal budget and the latter indicates a certain degree of generational conflict. Nevertheless, our results suggest that a positive link arises when examining the connection between education and pensions by using the projected old dependency ratio. A more detailed analysis of total education expenditure shows that only the non-mandatory educational levels benefit from the future population ageing.
    Keywords: Public Finance, Population ageing, Education, Pension Politics, PAYG, Macroeconomics.
    JEL: H52 H53 H55 I22 J11
    Date: 2016
  9. By: Monisankar Bishnu; Cagri S. Kumru; Arm Nakornthab
    Abstract: In this paper we derive the expression for optimal inheritance tax when agents' preferences are subject to temptation and self control problem. We consider a dynamic stochastic model as in Piketty and Saez (2013) where agents are heterogeneous in terms of bequest motives and labor productivities. In such a setup we show that the optimal inheritance tax rate decreases with the level of temptation, and thus it works as an incentive mechanism that leads to more bequests and makes succumbing to temptation less attractive. In fact, when temptation is acute, a subsidy may be justified at any percentile of bequest received. This holds independent of the variation in the models used in the literature as well as the assumption of labor elasticity. The study also reveals some interesting observations. Though from the point of view of incentives, this result has the same essence as in Krusell et al. (2010) where temptation justifies a subsidy on capital, we show that unlike their other policy prescription, the long run equilibrium does not demand a constant subsidy. Thus, even under temptation and self control issue, the standard Chamley - Judd result which recommends zero capital tax in the long run is still valid. However, in a setup that is comparable to Farhi and Werning (2010), our paper shows that in the presence of temptation and self control, if dynamic efficiency holds, optimality always requires a subsidy independent of whether social welfare function puts zero or positive direct weight on the children. This is in direct contrast to Piketty and Saez (2013). A calibration using the same micro data used by Piketty and Saez (2013) shows that the drop in inheritance tax is significant in the presence of temptation and self control.
    Keywords: Inheritance tax, Temptation, Self-control, Wealth mobility
    Date: 2016–06
  10. By: Korytin, A.V. (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Shatalovà, Svetlana Sergeevna (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The report presents the results of the search and analysis of the methods of the preferential property tax treatment as well as the recommendations on the practical implementation of the property tax world experience in Russia. This work research the international experience in this domain and analyze possible consequences of its adaptation based on the wide range of national datasets.
    Keywords: personal property, taxation, Russia
    Date: 2016–03–23
    Abstract: Until the last century, the business environment use a variety of tax engineers in order to distort the tax base. The starting point in calculating taxes are accounting information but in accounting, ethics standards are based on integrity, fairness and impartiality. Can be considered taxation the main factor of accounting truth distortion or the engine of creative accounting? In such cases the present paper provide a framework with which to evaluate these situations. This paper also presents a summary of the different study that analyses the history of ethics and morality in accounting and is based on account qualitative methods.
    Keywords: tax, accounting, ethics, morality
    JEL: D21 L21 M14 M41
    Date: 2016–06–20
  12. By: Desbonnet, Audrey; Kankanamge, Sumudu
    Abstract: In this paper, we investigate the importance of aggregate fluctuations for the assessment of the optimal level of public debt in an incomplete markets economy. We start by building a steady state model in which households are only subject to uninsurable idiosyncratic risk and evaluate the optimal level of public debt. We then augment the model to allow for aggregate risk and measure the impact on the optimal level. We show that the cyclical behavior of the economy has a quantitative impact on this level that can be decomposed into the effects of the aggregate productivity shock and the cyclicality of unemployment. Moreover, we find that matching wealth distribution statistics substantially changes the optimal level of public debt.
    Keywords: public debt, aggregate risk, precautionary saving, credit constraints.
    JEL: E32 E60 H30 H60
    Date: 2016–05
  13. By: Webster, Tony; Mallawaarachchi, Thilak
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2016–02
  14. By: Raju Huidrom (World Bank, Development Prospects Group); M. Ayhan Kose (World Bank, Development Prospects Group; Brookings Institution; CAMA; CEPR); Franziska L. Ohnsorge (World Bank, Development Prospects Group)
    Abstract: This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policymakers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.
    Keywords: Fiscal space, fiscal policy, developing economies, growth slowdown, fiscal rules, stabilization funds, expenditure frameworks
    JEL: E62 H50 H60
    Date: 2016–06
  15. By: Maciej Lis
    Abstract: The most important engines for the growth of aggregate health care expenditures (HCE) in last 50 years in OECD have been growth of income, technological progress in medicine and their interaction with institutional setting. The accelerating ageing is expected to additionally fuel the growth of HCE. The interaction between the growth factors with age is crucial for understanding the impact of ageing on health care expenditures. We propose a non-linear framework for testing the dynamics of the interaction of the growth of HCE with age structure. This framework utilizes the micro and cohort evidence from other studies on the shape of HCE and time-to-death. We have found that the growth of health care expenditure in recent decades in 26 OECD was concentrated on the close-to-death expenditures. Close-to-death HCE demonstrated twice higher growth rates than expenditures more distant from death. No clear dynamics of age pattern has been however identified.
    Keywords: health, modelling
    JEL: H51 I12 I18 J14
    Date: 2016–04

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