nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒04‒01
eleven papers chosen by
Thomas Andrén

  1. Taxes, frictions and asset shifting: when Swedes disinherited themselves By Escobar, Sebastian; Ohlsson, Henry; Selin, Håkan
  2. Corruption in Tax and Taxing the Corruption By Pazhanisamy, R.
  3. Does credit-card information reporting improve small-business tax compliance? By Slemrod, Joel; Collins, Brett; Hoopes, Jeffrey L.; Reck, Daniel; Sebastiani, Michael
  4. The Intergenerational Incidence of Green Tax Reform By Sebastian Rausch; Hidemichi Yonezawa
  5. Cross-country evidence on the impact of decentralisation and school autonomy on educational performance By Carlos Xabel Lastra-Anadón; Sonia Mukherjee
  6. The Impact of Policy Awareness: Evidence from Vehicle Choices Response to Fiscal Incentives By Davide Cerruti; Claudio Daminato; Massimo Filippini
  7. How Local Authorities Can Exploit the Potential for Effective Property Taxes: A Case Study of Harare By Nengeze, Munatswi
  8. Why do fiscal multipliers depend on fiscal positions? By Raju Huidrom; M. Ayhan Kose; Jamus J. Lim; Franziska L. Ohnsorge
  9. Revenue vs Expenditure Based Fiscal Consolidation: The Pass-Trough from Federal Cuts to Local Taxes By Luigi Marattin; Tommaso Nannicini; Francesco Porcelli
  10. The impact of decentralisation on the performance of health care systems: A non-linear relationship By Sean Dougherty; Luca Lorenzoni; Alberto Marino; Fabrice Murtin
  11. An Analysis of Discrepancies in Taxpayers' VAT Declarations in Rwanda By Mascagni, Giulia; Mukama, Denis; Santoro, Fabrizio

  1. By: Escobar, Sebastian (University of Munich); Ohlsson, Henry (Uppsala University); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We study tax-driven intergenerational asset shifting using a salient tax discontinuity and rich data on both donors and recipients. When the Swedish inheritance tax was in place, heirs could lower their inheritance tax bills by passing on part of the inheritance to their children. We present evidence on strong and precise responses to this incentive. We quantify optimization frictions, and we show that they are small in this setting. Both intensive and extensive margin policy responses can be rationalized by a simple model in which agents face small frictions at the extensive margin. Descriptive evidence suggests that the policy response is associated with the abundant supply of cheap legal advice on tax planning.
    Keywords: tax avoidance; tax rate elasticity; inheritance taxation; inter vivos gifts
    JEL: H21 H24 H26
    Date: 2019–03–22
  2. By: Pazhanisamy, R.
    Abstract: Most of the countries in the world face corruption and struggling against to it in many aspects. Due to various loopholes and institutional inefficiencies it continues to be pressing issues which affects public in various dimensions. The long existence of corruption around the world made an illusion to the policy makers and public as it is unavoidable and adjustable. This creates an intuition to esquire into what makes the corruption market successful all over the world for many centuries and what Economic theory is operate behind it. In this paper an inquiry is made into how the corruption market works effectively without any intervention. It also explore the possibility of the Ronald Coase theory’s to control the corruption and justifies what intervention is needed to achieve optimal amount of corruption. It concludes that to achieve the optimal amount of corruption in the society all farms of corruptions has to be internalized by introducing a permit and tax for corruption.
    Keywords: Corruption in Tax,taxing the Corruption,Coase theorem and tax,tax evasion,breaking the tax evasion using Coase theorem,internalizing the externalize of corruption
    JEL: B21 B41 D03 G02 G18 G28 H26 I38
    Date: 2019
  3. By: Slemrod, Joel; Collins, Brett; Hoopes, Jeffrey L.; Reck, Daniel; Sebastiani, Michael
    Abstract: We investigate the response of small businesses operating as sole proprietorships to Form 1099-K, an information report introduced in 2011 which provides the Internal Revenue Service with information about electronic sales (e.g., credit card sales). The overall impact of the policy appears to be relatively small. However, theory and distributional analysis isolates a subset of taxpayers expected to be especially sensitive to reporting, who report receipts equal to or slightly exceeding the receipts reported on 1099-K. Among this set of taxpayers, information reporting induced more complete tax reporting–30% of sensitive taxpayers filed a return declaring business income for the first time, and among those that were already filing, we estimate an increase in reported receipts by up to 24%. These taxpayers largely offset increased reported receipts with increased reported expenses, which do not face information reporting, diminishing the impact on reported net taxable income.
    Keywords: Tax evasion; Information reporting; Small businesses; Tax enforcement; Administrative data
    JEL: H20 H23 H25 H26
    Date: 2017–05–01
  4. By: Sebastian Rausch (ETH Zurich, Switzerland); Hidemichi Yonezawa (ETH Zurich, Switzerland)
    Abstract: We examine the lifetime incidence and intergenerational distributional effects of an economywide carbon tax swap using a numerical dynamic general equilibrium model with overlapping generations of the U.S. economy. We highlight various fundamental choices in policy design including (1) the level of the initial carbon tax, (2) the growth rate of the carbon tax trajectory of over time, and (3) alternative ways for revenue recycling. Without revenue recycling, we find that generations born before the tax is introduced experience smaller welfare losses, or even gain, relative to future generations. For suffciently low growth rates of the tax trajectory, the impacts for distant future generations decrease over time. For future generations born after the introduction of the tax, the negative welfare impacts are the smallest (largest) when revenues are recycled through lowering pre-existing capital income taxes (through per-capita lump-sum rebates). For generations born before the tax is introduced, we find that lump-sum rebates favor very old generations and labor (capital) income tax recycling favors very young generations (generations of intermediate age).
    Keywords: Carbon tax, Green Tax Reform, Intergenerational Incidence, Distributional Impacts, Overlapping Generations, Climate Policy
    JEL: H23 Q52 D91 Q43 C68
    Date: 2018–03
  5. By: Carlos Xabel Lastra-Anadón; Sonia Mukherjee
    Abstract: How do administrative and fiscal decentralisation relate to education system performance? The question is answered by exploiting a panel with several different measures of fiscal decentralisation: a measure of administrative decentralisation, as well as a measure of school autonomy (using six waves of PISA). These measures are related to educational outcomes, measured by PISA score country averages. The panel includes year fixed effects and multiple country covariates. Overall, a positive relationship is found linking administrative and fiscal decentralisation with performance, as measured by PISA tests. School autonomy is also positively related with educational outcomes, strengthening the estimated effects of administrative and fiscal decentralisation.
    Keywords: Educational performance, intergovernmental relations, public governance, public sector productivity
    JEL: H75 I28 O43
    Date: 2019–03–26
  6. By: Davide Cerruti (ETH Zurich, Switzerland); Claudio Daminato (ETH Zurich, Switzerland); Massimo Filippini (ETH Zurich, Switzerland)
    Abstract: Isolating the role of limited knowledge, psychological frictions and policy characteristics is key when evaluating a public program and designing future policies. This paper explores the role of awareness about the presence of fiscal programs in determining their impact on individual choices. Our identification strategy exploits quasi-experimental variation in the introduction of fiscal incentives aimed at promoting the purchase of energy efficient vehicles, and a direct measure of policy awareness at the individual level. We find an important impact of awareness on consumers’ vehicle choices, highlighting that limited awareness may represent a critical barrier to the effectiveness of public programs.
    Keywords: Policy awareness, Fiscal programs, Environmental taxation, Vehicle choices
    JEL: D12 D83 H23 H31 Q48
    Date: 2019–03
  7. By: Nengeze, Munatswi
    Abstract: Summary of African Tax Administration Paper 4 by Munatswi Nengeze
    Keywords: Finance, Governance,
    Date: 2019
  8. By: Raju Huidrom; M. Ayhan Kose; Jamus J. Lim; Franziska L. Ohnsorge
    Abstract: The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors’ concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. We document empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. We find that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.
    Keywords: Fiscal multipliers, fiscal position, state-dependency, Ricardian channel, interest rate channel, business cycle
    JEL: E62 H50 H60
    Date: 2019–03
  9. By: Luigi Marattin; Tommaso Nannicini; Francesco Porcelli
    Abstract: A growing literature emphasizes that the output effect of fiscal consolidation hinges on its composition, as the choice of increasing revenues vs cutting expenditures is not neutral. Existing studies, however, underscore the role of local governments in a federal setting. Indeed, transfer cuts at the central level might translate into higher local taxes, changing the effective composition of the fiscal adjustment. We evaluate this transmission mechanism in Italy, where municipalities below the threshold of 5,000 inhabitants were exempted from (large) transfer cuts in 2012. This allows us to implement a difference-in-discontinuities design in order to estimate the causal impact of transfer cuts on the composition of fiscal adjustment, also because tight fiscal rules impose a balanced budget on Italian municipalities. We disclose a pass-through mechanism by which local governments react to the contraction of intergovernmental grants by mainly increasing taxes rather than reducing spending. From a political economy perspective, this revenue based fiscal consolidation is driven by municipalities with low electoral competition and low party fragmentation. Keywords: fiscal consolidation, intergovernmental grants, difference-in-discontinuities. JEL classification codes: H2, H77, H87, D7.
    Date: 2019
  10. By: Sean Dougherty; Luca Lorenzoni; Alberto Marino; Fabrice Murtin
    Abstract: This paper examines the relationship between the degree of administrative decentralisation across levels of government in health care decision-making and health care spending, life expectancy as well as hospital costs. This empirical analysis builds on previous analytical research carried out by the OECD (Lorenzoni, Murtin et al., 2018; Lorenzoni and Marino, 2017), both of which established new methodological tools to analyse health sector performance. The present analysis extends this framework to examine the impact of centralisation versus decentralisation of responsibilities across levels of government, making use of newly collected data on governance and expenditure assignment, as well as non-linear empirical specifications.
    Keywords: governance, health care, hospitals, intergovernmental relations, Public economics, regional economics
    JEL: H75 I18 O43
    Date: 2019–03–26
  11. By: Mascagni, Giulia; Mukama, Denis; Santoro, Fabrizio
    Abstract: This report provides a descriptive analysis of discrepancies resulting from matching different value added tax (VAT) data sources in the Rwanda Revenue Authority database. VAT returns are declared by businesses of all sizes and types, from companies to individual traders. Internal discrepancy is the gap between different data sources, namely VAT declaration and VAT annexes, for the same taxpayer. External discrepancy refers to the gap, for the same transaction, between buyer’s and seller’s reports. We summarise the extent and depth of these discrepancies, as well as any changes that have occurred since a new VAT refund claim validation procedure was introduced in January 2017, which mainly affected buyers’ reporting. While internal discrepancy does not seem to be an issue, external discrepancy is much more frequent, with just 18 per cent of our observations reporting the same VAT amount across buyers and sellers. This share rises to 40 per cent when buyers’ reports are compared to sellers’ electronic billing machine (EBM) records. The great majority of discrepancies are due to transactions not being reported at all by one of the trading partners. This analysis is purely descriptive and is meant to provide more information on these discrepancies, in view of potentially designing a further study to test possible policy measures to increase compliance on VAT using available administrative data.
    Keywords: Finance, Governance,
    Date: 2019

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