nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒06‒10
eleven papers chosen by
Thomas Andrén

  1. Fiscal Policy and Fiscal Fragility: Evidence from the OECD By Makram El-Shagi; Gregor von Schweinitz
  2. Life satisfaction and austerity: Expectations and Macroeconomy By Sarah Brown; Alexandros Kontonikas; Alberto Montagnoli; Mirko Moro; Luisanna Onnis
  3. Hidden Inequalities: Tax Challenges of Market Women in Enugu and Kaduna States, Nigeria By Akpan, Imaobong; Sempere, Kas
  4. The Role of Information Technology to Enhance Property Tax Revenue in Kenya, Tanzania and Zambia By McCluskey, William; Franzsen, Riël; Kabinga, Mundia; Kasese, Chabala
  5. Good or bad tax? Assessing the early effects of the progressive and higher personal income tax in North Macedonia By Despina Tumanoska; Bojana Josifovska; Marjan Petreski
  6. Taxing vehicles, fuels, and road use: Opportunities for improving transport tax practice By Kurt van Dender
  7. The Effect of Tax-Motivated Transfer Pricing on U.S. Aggregate Trade Statistics: Working Paper 2019-05 By Dorian Carloni; Daniel Fried; Molly Saunders-Scott
  8. Why do we need self-employed persons? Some economic reflections, mainly tax related ones By Adam Adamczyk; Leszek Morawski; Jarek Neneman
  9. The use of revenues from carbon pricing By Melanie Marten; Kurt van Dender
  10. Targeting Disability Insurance Applications with Screening By Godard, Mathilde; Koning, Pierre; Lindeboom, Maarten
  11. Tax-based Own Resources to Finance the EU Budget. Potential Revenues, Summary Evaluation from a Sustainability Perspective, and Implementation Aspects By Margit Schratzenstaller; Alexander Krenek

  1. By: Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Gregor von Schweinitz (Halle Institute for Economic Research, Germany and Leipzig University, Germany)
    Abstract: In this paper, we use local projections to investigate the impact of consolidation shocks on GDP growh, conditional on the fragility of government finances. Based on the database of fiscal plans in OECD countries, we show that spending shocks are less detrimental than tax-based consolidation. In times of fiscal fragility, our results indicate strongly that governments should consolidate through surprise policy changes rather than announcements of consolidation at a later horizon.
    Keywords: Fiscal multipliers; fiscal consolidation; local projections
    JEL: E62 H63
    Date: 2019–06
  2. By: Sarah Brown (Department of Economics, University of Sheffield); Alexandros Kontonikas (University of Essex); Alberto Montagnoli (Department of Economics, University of Sheffield); Mirko Moro (University of Stirling); Luisanna Onnis (Huddersfield Business School, University of Huddersfield)
    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: Fiscal Austerity, Life Satisfaction, Macroeconomic Environment
    JEL: P16 H2 H5
    Date: 2019–05
  3. By: Akpan, Imaobong; Sempere, Kas
    Abstract: This paper presents the findings of a study on gender-based taxation differences among market traders in two Nigerian states. At a high level, no significant differences were found between female and male traders in the markets visited in terms of tax payments, payments for market services and tax increases. However, a closer look at the data shows implicit tax biases that affect women negatively. Although female traders pay the same amount of presumptive tax as male traders, they earn much less. Even female traders selling the same types of products as their male counterparts tend to earn less. Additionally, common tax increases beyond the legally stipulated amount, as well as the burden of unpaid care work (that keeps women away from earning more money), also aggravate the observed anti-woman tax bias. Based on these findings we recommend, in line with suggestions made by interviewed market leaders, that Nigerian tax policymakers should develop a segmented system of presumptive taxation more closely based on actual earnings, or at least based on the type of product sold. Such segmentation would help to alleviate the gender bias inherent to the current presumptive taxation system. This study also finds that all market traders value the benefits of female tax collectors. In general, this preference is due to a perception among traders that female tax collectors are more understanding and calmer than male tax collectors. Female tax collectors were also not reported to be involved in asking for sexual favours, which was a complaint levelled against some of their male colleagues. Some markets have even taken the initiative to create mixed-gender tax collection groups, and to replace male tax collectors reported for harassing women sexually with female tax collectors. Based on these findings we recommend that, in line with previous literature, Nigerian tax authorities should work to integrate more female tax collectors into the public tax system, as well as in the market unions and associations that act as tax collection agents for the government.
    Keywords: Economic Development, Finance, Gender, Governance,
    Date: 2019
  4. By: McCluskey, William; Franzsen, Riël; Kabinga, Mundia; Kasese, Chabala
    Abstract: Public finance theory suggests that property tax is an ideal local tax. But it’s also a ‘data-hungry’ tax, making it difficult and costly to administer properly– especially at the local government level where capacity, skills and resources are often lacking. Given its high data demands, property tax administration lends itself to the application of modern information and communication technology (ICT) systems. Over the last 40 to 50 years, however, studies have shown that weak administration is the core reason for poor revenue performance, particularly issues of data compilation and management, lack of transparency, poor billing and collection practices and weak enforcement. Summary of Working Paper 88 by William McCluskey, Riël Franzsen, Mundia Kabinga and Chabala Kasese
    Keywords: Economic Development, Finance, Governance,
    Date: 2019
  5. By: Despina Tumanoska; Bojana Josifovska; Marjan Petreski
    Date: 2019–06
  6. By: Kurt van Dender
    Abstract: This paper discusses the main external costs related to road transport and the design of taxes to manage them. It provides an overview of evolving tax practice in the European Union and the United States and identifies opportunities for better alignment of transport taxes with external costs. There is considerable scope for improving transport tax practice, notably by increasing the use of taxes based on road use. Distance charges offer great promise in delivering more efficient road transport. In heavily congested areas, targeted charges are a cost-effective way of reducing congestion. Fiscal objectives provide an impetus for change as improving vehicle fuel efficiency and fleet penetration of alternative fuel vehicles erode traditional tax bases, particularly those relating to fossil fuel use. A gradual shift from an energy-based approach towards distance-based transport taxes has the potential to establish a stable tax base in the road transport sector in the long run.
    Keywords: congestion, congestion charging, distance-charges, external costs, fuel taxes, pollution, road transport
    JEL: H23 Q58 R4 R41 R48
    Date: 2019–06–05
  7. By: Dorian Carloni; Daniel Fried; Molly Saunders-Scott
    Abstract: The prices that multinational corporations set for transactions among international affiliates—referred to as transfer prices—play an important role in determining where income is taxed. Many factors affect how multinationals set their transfer prices, including tax considerations. If tax considerations affect transfer prices, then those changes in transfer prices may distort aggregate trade and income statistics. In this paper, we analyze how corporate income tax rates affect trade flows between the affiliates of multinationals—known as related-party trade—to examine
    JEL: H25 H26 F23
    Date: 2019–05–31
  8. By: Adam Adamczyk; Leszek Morawski; Jarek Neneman
    Abstract: For many years, we have been hearing about the need for innovation and entrepreneurship. Successive Polish government declare their support for entrepreneurs and expand the catalog of privileges, mainly related to taxes and mandatory contributions. Not infrequently, in these discussions the self-employed are equated with entrepreneurs. In this work, we will seek an answer to the questions: Who, then, are the self-employed? Are they really entrepreneurs? Should we support their activities? And finally the fundamental question: What does the economy get from the self-employed? In this work we point out that the differences in rates of self-employment between countries may result from differences in taxation on the labor provided by self-employed and salaried workers. In the main part of the work, taking advantage of the potential of the EUROMOD tax-benefit microsimulation model, we show that in Europe there is no single model of taxation of work conducted as one’s own business. In the majority of the tax-contribution systems we examined, the profitability of employment or self-employment changes along with changes in income. In light of the regressivity of the burdens on the self-employed, as a rule it begins to be profitable only above a certain income level. In the first part of the work we define the self-employed as those who run a business, and later we distinguish within this group entrepreneurs, meaning those who take on risk and create innovations. Discussing the advantages and disadvantages of self-employment from the point of view of the self-employed and the employer, we point out that the benefits – including systemic (tax and contribution) benefits, outweigh the disadvantages. We also discuss in more detail the imposition of income tax on the self-employed. In the second part we present changes in the value of self-employment over the last 25 years. Here we use data from the World Bank and certain data points from the European Union Statistics on Income and Living Conditions (EU-SILC). They allow us to observe how the relationship between the self-employed and the economy is changing: The significance of services provided for other businesses is growing. Additionally, we can see that the significance of self-employment is falling. In Poland the level of (non-agricultural) self-employment is low. The dynamics of the rate of self-employment indicate that the influence of legal regulations on the scale of self-employment is secondary. It seems that in this case, technological and demographic factors are much more significant.
    Keywords: self-employment, taxation, incentives, EUROMOD, EU-SILC
    JEL: J38 J08 H30 L53
    Date: 2019–05–08
  9. By: Melanie Marten; Kurt van Dender
    Abstract: The paper collects comprehensive and detailed data on what 40 OECD and G20 economies do with the revenues from carbon taxes, emissions trading systems, and excise taxes on energy use. It notes that constraints – which can take the form of political commitments or legal earmarks – on revenue use differ between carbon taxes, emissions trading systems, and excise taxes. Constraints are less common for excise taxes, which also raise the most revenue. Carbon tax revenues are relatively often associated with environmental tax reforms, involving reductions in personal or corporate income taxes. Revenues from emissions trading systems are frequently directed towards green spending. The results may be relevant to the political economy of ambitious carbon pricing schemes in the sense that the political expedience of choices on revenue use may depend on the amount of revenue raised.
    Keywords: carbon pricing, climate change, effective carbon rates, environmental tax reform, external costs
    JEL: H21 H23 Q41 Q48 Q54 Q58
    Date: 2019–06–05
  10. By: Godard, Mathilde (GATE, University of Lyon); Koning, Pierre (Leiden University); Lindeboom, Maarten (Vrije Universiteit Amsterdam)
    Abstract: We examine the targeting effects of increased scrutiny in the screening of Disability Insurance (DI) applications using exogenous variation in screening induced by a policy reform. The reform raised DI application costs and revealed more information about the true disability status of applicants at the point of the award decision. We use administrative data on DI claims and awards and merge these with other administrative data on hospitalization, mortality and labor market outcomes. Regression Discontinuity in Time (RDiT) regressions show substantial declines in DI application rates and changes in the composition of the pool of applicants. We find that the health of those who are not discouraged from applying is worse than those who are. This suggests that the pool of applicants becomes more deserving. At the same time, compared with those who did not apply under the old system of more lax screening, those who are discouraged from applying are in worse health, have substantially lower earnings and are more often unemployed. This indicates that there are spillovers of the DI reform to other social insurance programs. As we do not find additional screening effects on health at the point of the award decision, we conclude that changes in the health condition of the pool of awarded applicants are fully driven by self-screening of (potential) applicants.
    Keywords: disability insurance, screening, composition effects, targeting efficiency
    JEL: H2 I3
    Date: 2019–05
  11. By: Margit Schratzenstaller (WIFO); Alexander Krenek
    Abstract: The existing EU system of own resources financing EU expenditures does not make any positive contribution to the various EU strategies and policies implemented to cope with the manifold long-term challenges confronting the EU. It is against this background that the European Commission as well as the High Level Group on Own Resources, but also the European Parliament have (repeatedly) called for the introduction of tax-based own resources to partially substitute national contributions to the EU budget. Our specific contribution to this debate consists in the exploration of sustainability-oriented options for tax-based own resources which are able to support sustainable growth and development in the EU. Based on a concept of sustainability-oriented taxation in the context of own resources for the EU, we develop sustainability-oriented evaluation criteria to assess the suitability of specific candidates for tax-based own resources. We then present various options for tax-based own resources and estimations of their revenue potential. Moreover, a summary evaluation of these options based on our evaluation criteria is undertaken. Finally, we address implementation aspects. In particular, we briefly present and discuss potential models to implement tax-based own resources in the EU within the existing legal framework.
    Keywords: EU system of own resources, tax-based own resources, EU budget, sustainability-oriented taxation
    Date: 2019–05–27

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