nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒05‒20
eleven papers chosen by
Thomas Andrén

  1. Taxation and Public Spending Efficiency: An International Comparison By António Afonso; João Tovar Jalles; Ana Venâncio
  2. Tax Mechanisms and Gradient Flows By Stefan Steinerberger; Aleh Tsyvinski
  3. Revisiting the impact of direct taxes and transfers on poverty and inequality in South Africa By Maboshe Mashekwa; Woolard Ingrid
  4. Democratisation and tax structure in the presence of home production: Evidence from the Kingdom of Greece By Pantelis Kammas; Vassilis Sarantides
  5. The distributional impact of tax and benefit systems in six African countries By Barnes Helen; Wright Gemma; Noble Michael; Gasior Katrin; Leventi Chrysa
  6. Acceptability of e-Filing of Taxes by Micro-Entrepreneurs in Northwestern Nigeria By Mas'ud, Abdulsalam
  7. Delegation of Taxation Authority and Multipolicy Commitment in a Decentralized Leadership Model By Nobuo Akai; Takahiro Watanabe
  8. Does fiscal consolidation hurt economic growth? Empirical evidence from Spanish regions By Lago Peñas, Santiago; Vaquero-Garcia, Alberto; Sanchez-Fernandez, Patricio; Lopez-Bermudez, Beatriz
  9. Tax-motivated transfer mispricing in South Africa: Direct evidence using transaction data By Wier Ludvig
  10. The political economy of educational policies and inequality of opportunity By Vincenzo Prete; Claudio Zoli
  11. Acceptability of e-Filing of Taxes by Micro-Entrepreneurs in Northwestern Nigeria By Mas'ud, Abdulsalam

  1. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: This paper evaluates the relevance of the taxation for public spending efficiency in a sample of OECD economies in the period 2003-2017. First, we compute the data envelopment analysis (DEA) scores and the Malmquist productivity index to measure the change in total factor productivity, the change in efficiency and the change in technology. Second, we explain these newly computed public efficiency scores with tax structures using a reduced-form panel data regression specification. Looking at the period between 2007 and 2017, our main findings are as follows: inputs could be theoretically lower by approximately 32-34%; the Malmquist indices show an overall decrease in technology and in TFP. Crucial for policymaking, we find that expenditure efficiency is negatively associated with taxation, more specifically direct and indirect taxes negatively affect government efficiency performance, and the same is true for social security contributions.
    Keywords: government spending efficiency; public sector performance; tax structure; data envelopment analysis (DEA); Malmquist indices; non-parametric estimation; panel data; OECD
    JEL: C14 C23 H11 H21 H50
    Date: 2019–05
  2. By: Stefan Steinerberger; Aleh Tsyvinski
    Abstract: We demonstrate how a static optimal income taxation problem can be analyzed using dynamical methods. We show that the taxation problem is intimately connected to the heat equation and derive a new property of the optimal tax which we call the fairness principle. The optimal tax at a given income is equal to the weighted by the heat kernels average of optimal taxes at other incomes and income densities. The fairness principle arises not due to equality considerations but represents an efficient way to smooth the burden of taxes and generated revenues across incomes. Just as nature distributes heat evenly, the optimal way for a government to raise revenues is to distribute the tax burden and raised revenues evenly among individuals. We then construct a gradient flow of taxes – a dynamic process changing the existing tax system in the direction of the increase in tax revenues – and show that it takes the form of a heat equation. The fairness principle holds also for the short-term asymptotics of the gradient flow. The gradient flow is a continuous process of a reform of the nonlinear tax and thus unifies the variational approach to taxation and optimal taxation
    JEL: E62 H21
    Date: 2019–05
  3. By: Maboshe Mashekwa; Woolard Ingrid
    Abstract: This paper uses a recent household survey and the CEQ framework to revisit and extend previous research on the impact of fiscal policy on income redistribution, and poverty in South Africa.We find, in accordance with previous research, that direct taxes and cash transfers are overall progressive and reduce inequality and poverty. Our disaggregated analyses, however, reveal that medical and interest tax benefits are regressive.We also find that certain social transfers provided to some minority population groups are not particularly well targeted. Periodically reviewing the effectiveness of fiscal policy at disaggregated levels would help to further improve the effectiveness of fiscal policy.
    Keywords: Poverty and inequality,taxes,Fiscal incidence,Fiscal policy
    Date: 2018
  4. By: Pantelis Kammas (Athens University of Economics and Business); Vassilis Sarantides (Department of Economics, University of Sheffield)
    Abstract: This paper examines the impact of democratisation on tax structure in an agrarian economy where goods can be produced at home for self-consumption. We first develop a model of optimal taxation with heterogeneous agents where the good produced in the market is subject to a consumption tax, whereas the homogeneous good produced at home is burdened by a direct tax (such as land tithes). Contrary to conventional theory, our model suggests that extension of the voting franchise to poorer segments of the population exerts a negative impact on the share of direct to indirect taxes. Using unique national and regional tax data for the Kingdom of Greece - a typical agrarian economy when universal male suffrage was established in 1864 - we provide consistent empirical evidence. Greek governments adjusted tax policy in order to meet the preferences of the newly enfranchised electorate that constituted mostly by peasants and farmers. This group was harmed substantially by direct taxes on land but was able to avoid indirect taxes through self-consumption. We also employ a sample of 12 European countries over the same period and provide evidence for a similar change in the tax structure when the agricultural sector dominates the economy.
    Keywords: democracy, tax structure, fiscal capacity
    JEL: P16 H2 H5
    Date: 2019–05
  5. By: Barnes Helen; Wright Gemma; Noble Michael; Gasior Katrin; Leventi Chrysa
    Abstract: This paper assesses the effects of public policies on income taxes and benefits in six African countries. The comparative analysis focuses on the distribution and composition of incomes and assesses the effect of these policies on inequality and poverty.The results are based on newly developed microsimulation models for Ethiopia, Ghana, Mozambique, South Africa, Tanzania, and Zambia. They highlight differences in tax and benefit systems among these African countries, show the extent (or lack) of support available for different population sub-groups, and disentangles the redistributive impact of various income components.
    Keywords: microsimulation,Tax-benefit microsimulation,Poverty,Income inequality
    Date: 2018
  6. By: Mas'ud, Abdulsalam
    Abstract: E-filing for some kinds of tax payments was introduced at the federal level in Nigeria in 2013, yet it has not been made available by state government for the collection of Personal Income Tax from micro-entrepreneurs – a major source of revenue. This research was designed to investigate the acceptability of e-filing to micro-entrepreneurs in Northwestern Nigeria. Micro-entrepreneurs were asked what factors would affect their willingness to use e-filing should it become available. Data were collected through survey questionnaires from 384 micro-entrepreneurs and interviews with three tax consultants in the region. Performance expectancy was found to be the main predictor of e-filing acceptability by among micro-entrepreneurs: its use will likely enhance their ability to pay their taxes. Effort expectancy is the second main predictor, implying that micro-entrepreneurs believe that e-filing will be easy to use, and thus influence its acceptability. Social influence is the third main predictor of e-filing acceptability; friends, family, and business associates who value e-filing will influence its acceptance among micro-entrepreneurs. Trust in e-filing software was found to be an insignificant predictor of e-filing acceptability for micro-entrepreneurs. Lastly, awareness was found to be a negative factor that would affect the willingness of micro-entrepreneurs to use e-filing: while they are willing to use e-filing, they lack awareness of its operating modalities. In line with the findings, it is recommended that state government in Nigeria should introduce an e-filing system for collecting taxes from micro-entrepreneurs. The e-filing software design needs to be bilingual and fully reliable to gain the trust of its potential users, and the use of intermediaries to assist the users should be encouraged.
    Keywords: Finance, Governance,
    Date: 2019
  7. By: Nobuo Akai (Professor, Osaka School of International Public Policy, Osaka University); Takahiro Watanabe (PhD. Student, Graduate School of Economics, Osaka University)
    Abstract: This paper examines to what extent taxation authority should be delegated to local or lower-level government. Delegation of taxation authority can be regarded as a commitment to the local tax rate ex ante in a decentralized leadership model, in which local governments set policies ex ante and the central government decides transfer policies ex post. Previous papers point out that the ex post interregional transfers of the central government distort the ex ante regional policies of local governments. However, Silva (2014, 2015) clarify the case where efficient expenditure by local governments is achieved. This paper examines the delegation of taxation authority by extending Silva's model to include commitment to taxation and generally derives the conditions when efficient public expenditure by local governments can be achieved in relation to the delegation of taxation authority. The model adopted in this paper allows various levels of spillovers of local public goods and various types of multipolicy commitments of taxation and/or expenditure.
    Keywords: Multipolicy commitment. Ex post interregional transfers. Spillover effect
    JEL: H41 H71 H72 H77
    Date: 2019–05
  8. By: Lago Peñas, Santiago; Vaquero-Garcia, Alberto; Sanchez-Fernandez, Patricio; Lopez-Bermudez, Beatriz
    Abstract: This article provides empirical evidence on the effect of fiscal consolidation in decentralized countries. The focus on Spain is justified for three reasons. First, it is one of the OECD countries that has been the most affected by the Great Recession in terms of both GDP and public deficit. Second, it is one of the most decentralized countries in the world. Third, the compliance with fiscal consolidation targets has been very diverse across regions. Using both time series econometrics and the synthetic control method approach (SCM), the authors show that compliance with fiscal targets at the regional level has not involved lower GDP growth rates in the short run.
    Keywords: fiscal consolidation,regional economic growth,great recession
    JEL: H74 R11 H62
    Date: 2019
  9. By: Wier Ludvig
    Abstract: This paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country.Using South African transaction-level customs data, I directly test for transfer price deviations from arm’s-length pricing. I find that multinational firms in South Africa manipulate transfer prices in order to shift taxable profits to low-tax countries. The estimated tax loss is 0.5 per cent of corporate tax payments.My estimates do not support the common belief that transfer mispricing in South Africa is more severe than in advanced economies. I find that an OECD-recommended reform had no long-term impact on transfer mispricing but argue that the method used in this paper provides a cost-efficient way to curb transfer mispricing.Resources Appendix.xlsx
    Keywords: Multinational firms,Profit shifting,Tax,Developing countries,International taxation
    Date: 2018
  10. By: Vincenzo Prete (Department of Economics, University Of Verona); Claudio Zoli (Department of Economics, University Of Verona)
    Abstract: We propose a political economy model to explain cross-country differences observed in educational policies and to show how such heterogeneity is associated with the level of a country’s development and inequality. Parents, heterogeneous in terms of income and their child’s ability, vote over the educational policy, by deciding the allocation of a given public budget between basic and higher education. Parents can invest in supplemental private education to increase the probability of their children of being admitted to higher education. When the level of development is low and inequality between social classes is sufficiently large, there is low exchange social mobility in the access to higher education, and educational policies are characterized by a large relative per-student expenditure in higher education.
    Keywords: Education, Voting, Development, Inequality, Mobility
    JEL: D31 H52 I24 I25
    Date: 2019
  11. By: Mas'ud, Abdulsalam
    Abstract: With the first implementation of e-filing by the US in 1986, many countries in Europe, Asia and Africa followed suit. E-filing for certain tax payments was introduced at the federal level in Nigeria in 2013. However, none of the State Boards of Internal Revenue (or State Internal Revenue Services) have made the system available for the collection of personal income taxes from micro-entrepreneurs – a major source of their revenue. This research was designed to investigate the acceptability of e-filing for micro-entrepreneurs in northwestern Nigeria. Summary of ICTD Working Paper 96 by Abdulsalam Mas’ud.
    Keywords: Economic Development, Finance, Governance,
    Date: 2019

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