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on Public Economics |
| By: | Francis Bloch; Gabrielle Demange |
| Abstract: | This paper analyzes taxation of an Internet platform attracting users from different jurisdictions. When corporate income tax rates are different in the two jurisdictions, the platform distorts prices and outputs in order to shift profit to the low-tax country. We analyze the comparative statics effects of an increase in the tax rate of one country. When cross-effects are present in both countries, the platform has an incentive to increase the number of users in the high-tax country and decrease the number of users in the low-tax country. When externalities only flow from one market to another, an increase in the corporate tax rate results either in a decrease or an increase in the number of users in both countries depending on the direction of externalities. We compare the baseline regime of separate accounting (SA) with a regime of formula apportionment (FA), where the tax bill is apportioned in proportion to the number of users in the two countries. Under FA, an increase in the corporate tax rate increases the number of users in the low-tax country and decreases the number of users in the high-tax country. We use a numerical simulation to show that the high-tax country prefers SA to FA whereas the low-tax country prefers FA to SA. |
| Keywords: | digital platforms, multinational firms, corporate income taxation, formula apportionment, separate accounting |
| JEL: | H32 H25 L12 L14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7818&r=all |
| By: | K. Peren Arin; Emin Gahramanov; Tolga Omay; Mehmet A. Ulubasoglu |
| Abstract: | Previous literature provided mixed evidence regarding the effects of two major tax instruments, namely, labor income taxes and corporate taxes on economic growth. We hypothesize that the mixed evidence may be due to state-dependency of labor taxes. While corporate taxes retard economic growth by discouraging entrepreneurship in a linear fashion, the negative effect of labor taxes on growth may depend on the state of the economy, and may, thus, be non-linear. We provide a simple theoretical model which supports the latter hypothesis, and empirically test our predictions by using both statutory and average tax rates for a sample of 19 OECD countries over the 1981–2005 period. We also contribute to the literature by employing a newly developed Panel Smooth Transition (PSTR) model that controls for non-linearities in the tax structure-economic growth relationship. Our empirical findings suggest that while taxes on corporate income are distortionary for growth in both high- and low-growth regimes, taxes on labor income are harmful only during the high-growth regime. |
| Keywords: | Panel Smooth Transition, Fiscal Policy, Tax Policy, Growth |
| JEL: | O23 H30 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2019-68&r=all |
| By: | Miguel Almunia; Irem Guceri; Ben Lockwood; Kimberley Ann Scharf |
| Abstract: | This paper estimates the effects of tax incentives on charitable contributions in the UK, using the universe of self-assessment income tax returns between 2005 and 2013. We exploit variation from a large reform in 2010 to estimate intensive and extensive-margin tax-price elasticities of giving. Using a predicted-tax-rate instrument for the price of giving relative to consumption, we find an intensive-margin elasticity of about -0.2 and an extensive-margin elasticity of -0.1, yielding a total elasticity of about -0.3. To further explore the extensive-margin response, we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around £47. We also study the welfare effects of tax incentives, extending the theoretical literature to allow for extensive-margin giving and for a fixed cost of declaring donations. Taking into account these factors, there is a case for increasing the subsidy on charitable giving in the UK. |
| Keywords: | charitable giving, tax incentives, welfare |
| JEL: | H24 H31 D64 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7820&r=all |
| By: | Gilda Almeida (University of Miami Law School, J.D. Candidate) |
| Abstract: | Countries heavily rely on tax revenue for their welfare programs, which aim to reduce inequalities. Taxes are countries’ main sources of revenue and provide funding for governmental expenditures. A country’s spending is usually divided into categories: mandatory, discretionary, and interest on debt expenditures. These include assistance programs, such as the United States’ Medicaid program, the Supplemental Nutrition Program (so-called foods stamps), and the Temporary Assistance for Needy Families program. The United States lowered its U.S. corporate income tax rate from 35% to 21% in 2018, after the enactment of the United States Tax Cuts and Jobs Act. Similarly, members of the Organization for Economic and Co-operation and Development (OECD) lowered their corporate statutory tax from their 2000 average rate of 28.6% to 21.4% in 2018. In the international context, state-to-state tax arbitration is implemented by OECD members to provide multinationals with double tax relief. In contrast, individuals do not benefit from a similar tax reduction. The United States’ highest marginal income tax rate was reduced from 39.60% to 37% in 2018, whereas 0.5% was the average reduction implemented for individuals by OECD members from 2000 to 2017. This paper analyzes whether states expect private corporations to undertake more social responsibility when considering tax benefits. States’ examination of corporates’ social responsibility includes whether private social accountabilities align with corporations’ profit-oriented natures as well as state interest in public welfare. Furthermore, this paper examines states’ alternative sources of revenues that could balance out the effects of the reduction of corporations’ tax rates and other granted benefits, including tax arbitration for multinationals’ double tax relief. |
| Keywords: | federal taxes, OECD, tax arbitration, welfare program, tax revenue, corporate tax, income tax, Tax Cuts and Jobs Act, individual taxes, MAP arbitration, alternative sources of revenue, mutual agreement procedure, international taxation, Base Erosion Profit Shifting (BEPS), Action 14, Section 482, arm’s length |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:smo:cpaper:6ga&r=all |
| By: | Benjamin Harbolt |
| Abstract: | As e-commerce has grown over the last few decades so has states' concern for its use for sales tax avoidance. Using a panel of Washington State tax jurisdictions from 2005 through 2015, I estimate the effect of a sales tax regime change on the elasticities of taxable sales. I find the regime change, targeted at reducing sales tax avoidance through remote purchases, had a differential impact that varied by tax jurisdiction. I find that in tax jurisdictions near the border of lower-sales-tax states (Oregon and Idaho) consumers became more responsive to the difference in sales tax rates across borders than their counterparts in the interior of the state. I interpret this as a substitution by consumers along the Oregon and Idaho border from e-commerce purchases to cross-border shopping in order to avoid sales taxes. |
| Keywords: | sales tax avoidance, destination-based taxation, cross-border shopping |
| JEL: | H26 H71 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7814&r=all |
| By: | Tidiane Ly (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France; Institute of Economics (IdEP), Faculty of Economics, Università della Svizzera italiana) |
| Abstract: | This paper studies local governments' public policies in a metropolitan area plagued by traffic congestion, where both residents and workers consume local public goods. We develop a new spatial sub-metropolitan tax competition model which features a central city surrounded by suburban towns linked by mobile capital and mobile residents who commute to work. We show that Pareto-efficiency is achieved if towns can retain their workers using labor subsidies. Otherwise, traffic congestion in the city is inefficiently high and local governments respond by setting inefficient public policies: (1) the city over-taxes capital and under-taxes residents, which leads to too little capital and too many residents in the city; (2) local public goods are under-provided in the city and over-provided in the towns. |
| Keywords: | Tax competition, Urban economics, Traffic congestion, Public goods, Mobility |
| JEL: | H71 H72 R50 R51 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1925&r=all |
| By: | Lisandra Flach; Michael Irlacher; Florian Unger |
| Abstract: | This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties. We estimate the effects of corporate taxes on trade dynamics by exploiting policy reforms in 45 destination countries of exports during the period 2005-2012. Our results provide strong support for competitive effects of corporate taxation. |
| Keywords: | multi-product firms, corporate taxation, exporter dynamics, international trade |
| JEL: | H25 F12 L11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7809&r=all |
| By: | Flach, Lisandra; Irlacher, Michael; Unger, Florian |
| Abstract: | This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties. We estimate the effects of corporate taxes on trade dynamics by exploiting policy reforms in 45 destination countries of exports during the period 2005-2012. Our results provide strong support for competitive effects of corporate taxation. |
| Keywords: | multi-product firms,corporate taxation,exporter dynamics,international trade |
| JEL: | H25 F12 L11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:380&r=all |
| By: | John Cawley; David E. Frisvold; Anna Hill; David Jones |
| Abstract: | Several cities in the U.S. have implemented taxes on sugar-sweetened beverages (SSBs) in an attempt to improve public health and raise revenue. On July 1, 2017, Oakland California introduced a tax of one cent per ounce on SSBs. In this paper, we estimate the impact of the tax on retail prices, product availability, purchases, and child and adult consumption of taxed beverages in Oakland, as well as of potential substitute beverages. We collected data from Oakland stores and their customers and a matched group of stores in surrounding counties and their customers. We collected information in the months prior to the implementation of the tax and again a year later on: (1) prices, (2) purchase information from customers exiting the stores, and (3) a follow-up household survey of adults and child beverage purchases and consumption. We use a difference-in-differences identification strategy to estimate the impact of the tax on prices, purchases, and consumption of taxed beverages. We find that roughly 60 percent of the tax was passed on to consumers in the form of higher prices. There was a slight decrease in the volume of SSBs purchased per shopping trip in Oakland and a small increase in purchases at stores outside of the city, and we find some evidence of increased shopping by Oakland residents at stores outside of the city. We do not find evidence of substantial changes in the overall consumption of SSBs or of added sugars consumed through beverages for either adults or children after the tax. |
| JEL: | H71 H75 I18 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26233&r=all |
| By: | Naritomi, Joana |
| Abstract: | To investigate the enforcement value of third-party information on potentially collusive taxpayers, I study an anti-tax evasion program that rewards consumers for ensuring that firms report sales and estab-ishes a verification system to aid whistle-blowing consumers in São Paulo, Brazil (Nota Fiscal Paulista). Firms reported sales increased by at least 21 percent over 4 years. The results are consistent with fixed costs of concealing collusion, increased detection probability from whistle-blower threats, and with behavioral biases associated with lotteries amplifying the enforcement value of the program. Although firms increased reported expenses, tax revenue net of rewards increased by 9.3 percent. |
| JEL: | H25 H26 L25 O14 O17 |
| Date: | 2019–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101538&r=all |
| By: | Thomas Douenne (Paris School of Economics – Université Paris 1 Panthéon Sorbonne); Adrien Fabre (Paris School of Economics – Université Paris 1 Panthéon Sorbonne) |
| Abstract: | Using a new survey and National households' survey data, we investigate French perception over carbon taxation. We find that French people largely reject a tax and dividend policy where revenues of the tax would be redistributed uniformly. However, their perception about the properties of the tax are biased: people overestimate the negative impact on their purchasing power, wrongly think the scheme is regressive, and do not perceive it as environmentally effective. Our econometric analysis shows that correcting these three bias would suffice to generate majority acceptance. Yet, we find that people's beliefs are persistent and their revisions biased towards pessimism, so that only few can be convinced. |
| Keywords: | Climate Policy, Carbon tax, Bias, Beliefs Preferences |
| JEL: | D72 D91 H23 H31 Q58 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:fae:ppaper:2019.05&r=all |
| By: | Florian Scheuer; Joel Slemrod |
| Abstract: | The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International’s Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation. |
| Keywords: | perceived corruption, economic growth, panel data |
| JEL: | C23 H11 K40 O11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7817&r=all |
| By: | Djeneba Doumbia; Tidiane Kinda |
| Abstract: | Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed? Using newly assembled data on spending composition for 83 countries across all income groups, this paper shows that reallocating spending toward social protection and infrastructure is associated with reduced income inequality, particularly when it is financed through cuts in defense spending. However, the political and security situation matters. The analysis does not find evidence that lowering defense spending to finance infrastructure and social outlays improves income distribution in countries with weak institutions and at higher risk of conflict. Reallocating social protection and infrastructure spending towards other types of spending tends to increase income inequality. Accounting for the long-term impact of health spending, and particularly education spending, helps to better capture the equalizing effects of these expenditures. The paper includes a discussion of the implications of the findings for Indonesia, a major emerging market where income inequality is at the center of policy issues. |
| Date: | 2019–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/188&r=all |
| By: | Nyasha, Sheilla; Odhiambo, Nicholas M |
| Abstract: | In this paper, theoretical and empirical literature on the relationship between governmentexpenditure and economic growth has been reviewed in detail. Specific focus was placed on thereview of literature that assessed the impact of government spending on economic growth. Theliterature reviewed has shown that the impact of government spending on economic growth is notclear cut. It varied from positive to negative; with some studies even finding no impact. The studyidentified a number of factors that could be driving this inconsistency in conclusions by variousstudies on the same topic. Differences in the study samples, study periods, methodologies employedand the proxies for government expenditure have been the key causes of varying results andconclusions on the nature of the impact of government spending on economic growth. This study hasalso revealed that as economists get desperate in concluding the government expenditure-economicgrowth debate, they are increasingly disaggregating the government expenditure into variouscomponents and test the impact of each component on economic growth. The practice has, however,not been able to move the debate closer to its conclusion, as the results from such practice are alsowidely varying. Although the impact of government spending on economic growth was found to beinconclusive, the scale tilts towards a positive impact. |
| Keywords: | Public Expenditure, Government Expenditure, Government Size, Economic |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:uza:wpaper:25742&r=all |
| By: | Jean-Marie Monnier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The communication is mainly of a methodological nature. It aims to emphasize the role of the three main characteristics of the new capitalism in the analysis of the territorial foundations of the corporate tax. The first part is devoted to a brief presentation of the architecture of the tax system during the Fordist period, which is the result of a process of sedimentation linked to the accumulation of successive layers of devices. However, major changes resulting from the globalisation of economy have led to a gradual imbalance between tax bases and the territoriality of the tax. This misalignment has been accentuated by the emergence of the information economy and the new capitalism. This results in the deterritorialization of potentially taxable bases. |
| Abstract: | La communication est principalement de nature méthodologique. Elle vise à souligner le rôle des trois caractéristiques majeures du nouveau capitalisme dans l'analyse des fondements territoriaux de l'impôt sur les sociétés. La première partie est consacrée à une rapide présentation de l'architecture du système de prélèvements durant la période fordiste qui est issu d'un processus de sédimentation lié à l'accumulation de strates successives de dispositifs. Cependant, des mutations importantes résultant de la mondialisation de l'économie ont initié un progressif désajustement entre bases taxables et territorialité de l'impôt. Ce désajustement s'est accentué avec l'émergence de l'économie de l'information et du nouveau capitalisme. Cela aboutit à la déterritorialisation des bases potentiellement taxables. Abstract The communication is mainly of a methodological nature. It aims to emphasize the role of the |
| Keywords: | Tax system,Corporate tax,Taxable base,New capitalism,Système fiscal,Impôt sur les sociétés,Assiette imposable,Nouveau capitalisme |
| Date: | 2018–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02276186&r=all |
| By: | Nyasha, Sheilla; Odhiambo, Nicholas M |
| Abstract: | In this paper, we survey the existing literature on the causal relationship between government sizeand economic growth, highlighting the theoretical and empirical evidence from topical work.Although some previous studies have endeavoured to conduct a survey on the existing research onthe causal relationship between government size and economic growth, the majority of thesestudies have focused on the impact of the two macroeconomic variables and failed to providecoverage on the causality aspect of their relationship. To our knowledge, this may well be the firststudy of its kind to survey, in detail, the existing literature on the causal relationship betweengovernment size and economic growth ? in all the countries, whether developing or developed. Byand large, our study shows that direction of causality between these two variables has fourpossible outcomes; and that all the outcomes have found empirical support, based on variationsin the country or region under study, methodology, proxies, data set used and time frameconsidered. However, of the four, the most prominent is the second view, which validatesunidirectional Granger-causality from economic growth to government size, followed by thebidirectional Granger-causality category. The study, therefore, concludes that the causalrelationship between government size and economic growth is not clear-cut. |
| Keywords: | Government Size, Government Expenditure, Economic Growth, Granger-Causality |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:uza:wpaper:25740&r=all |