nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒12‒16
nine papers chosen by
Thomas Andrén

  1. Banks and corporate income taxation: A review By Gawehn, Vanessa
  2. Profit Taxation and Bank Risk Taking By Kogler, Michael
  3. Taxing capital and labor when both factors are imperfectly mobile internationally By Hippolyte d'Albis; Agnès Bénassy-Quéré
  4. Medical Services Premimum Task Force: Tax Reform Proposals for the Province of British Columbia By Tedds, Lindsay M.; Duff, David; Ramsay, Paul
  5. Essays on corporate finance and corporate taxation By Brok, Peter
  6. The tax structure of an economy in crisis: Greece 2009-2017 By Leventi, Chrysa; Picos, Fidel
  7. Financing Entrepreneurship through the Tax Code: Angel Investor Tax Credits By Sabrina T. Howell; Filippo Mezzanotti
  8. Quantification of changes in the VAT gap: an econometric approach By Konopczak, Karolina
  9. Information provision and preferences for education spending: Evidence from representative survey experiments in three countries By Cattaneo, Maria; Lergetporer, Philipp; Schwerdt, Guido; Werner, Katharina; Woessmann, L.; Wolter, Stefan C.

  1. By: Gawehn, Vanessa
    Abstract: In this paper, I review the empirical literature in the intersection of banks and corporate income taxation that emerged over the last two decades. To structure the included studies, I use a stakeholder approach and outline how corporate income taxation plays into the relation of banks and their four main stakeholders: bank regulators, customers, investors and tax authorities. My contribution to the literature is threefold: First, I contribute by providing, to the best of my knowledge, a first comprehensive review on this topic. Second, I point to areas for future research. Third, I deduce policy implications from the studies under review. In sum, the studies show that taxes distort banks' pricing decisions, the relative attractiveness of debt and equity financing, the decision to report on or off the balance sheet and banks' investment allocations. Empirical insights on how tax rules affect banks' decision-making are helpful for policymakers to tailor suitable and sustainable tax legislation directed at banks.
    Keywords: corporate income taxes,banks,stakeholder approach,decision-making process
    JEL: G21 H22 H25 M41
    Date: 2019
  2. By: Kogler, Michael
    Abstract: How can tax policy improve financial stability? Recent studies point to large potential stability gains from a reform that eliminates the debt bias in corporate taxation. It is well known that such a reform reduces bank leverage. This paper analyzes a novel, complementary channel: bank risk taking. We model the portfolio choice of banks under moral hazard and thereby emphasize the “incentive function” of equity. We find that (i) an allowance for corporate equity (ACE) and a lower corporate tax rate discourage risk taking and offer stability and welfare gains, (ii) a revenue-neutral introduction of the ACE unambiguously improves financial stability, and (iii) capital regulation and deposit insurance importantly influence the tax sensitivities of bank risk taking.
    Keywords: Corporate taxation, tax reform, banking, risk taking, financial stability
    JEL: G21 G28 H25
    Date: 2019–12
  3. By: Hippolyte d'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Agnès Bénassy-Quéré (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: We revisit the standard theoretical model of tax competition to consider imperfect mobility of both capital and labor. We show that the mobility of one factor a_ects the taxation of both factors, and that the race-to-the-bottom narrative (with burden shifting) applies essentially to capital exporting countries. We test our predictions for a panel of 28 OECD countries over 1997-2014. We _nd capital taxation to be less sensitive to capital mobility in net capital importing countries than for net capital exporters. Various robustness checks support this conclusion. Qantitatively, though, rising capital mobility contributes much less than population ageing to the decline of capital tax rates over the period studied.
    Keywords: tax competition,globalization,imperfect factor mobility
    Date: 2019–09
  4. By: Tedds, Lindsay M.; Duff, David; Ramsay, Paul
    Abstract: In the September 2017 B.C. Budget Update, the government announced that MSP premiums would be eliminated within four years, with advice from a task force of experts on how best to replace the foregone MSP premium revenue. The MSP Task Force was formed in November 2017 and asked to report by March 31, 2018. The Terms of Reference1 for the Task Force required us to apply the principles of fairness, efficiency, business competitiveness, simplicity, revenue stability, and progressivity in determining the best way to replace MSP premium revenues. On February 1, 2018 we provided the Minister with our Interim Report that described our process and what we had heard so far. We conducted a thorough review of the B.C. tax system and met with or received input from 70 individuals and 28 stakeholder groups. The most common theme in the input was that the revenue should be replaced by a combination of an increase to personal income tax and a payroll tax. Other suggestions included taxes on unhealthy activities, corporate tax changes, broadening the Provincial Sales Tax (PST) base, and changing the Home Owner Grant to an income-tested program. Our Interim Report provided the following initial advice to the Minister: }} Eliminate premiums and start collecting the replacement revenues all at once without phase-in; }} Provide reasonable notice to allow employees and employers to prepare for the change; and, }} Use a combination of measures to mitigate the negative impacts of each individual measure. In Budget 2018, delivered on February 20, 2018, the Minister announced that MSP premiums would be eliminated effective January 2020, with foregone revenue offset by the Employer Health Tax, a payroll tax. The budget document also indicated that the Task Force should continue its work and make recommendations to improve the progressivity, fairness, and competitiveness of the tax system. We have built upon some of the ideas we were working on to raise revenue and some observations we made while reviewing the tax system, but our proposals are now generally intended to be revenue-neutral rather than ways to raise revenues.
    Keywords: MSP Premiums, tax reform
    JEL: H21 H22 H24 H25 H26 H27 H29
    Date: 2018–04
  5. By: Brok, Peter (Tilburg University, School of Economics and Management)
    Abstract: This dissertation contains three chapters, all related to corporate finance and corporate taxation. The first chapter studies how room for interpretation in tax law affects tax planning. The second chapter studies the effects of taxation are influenced by differences in the corporate group structures of multinationals. The third chapter investigates the effects of tax planning opportunities on employment and labor costs.
    Date: 2019
  6. By: Leventi, Chrysa; Picos, Fidel
    Abstract: The 2010 Economic Adjustment Programme initiated a period of strict international supervision with respect to tax policy in Greece. The country implemented a large-scale fiscal consolidation package, aiming to reduce its public deficit below 3% of GDP by 2016. Since the beginning of the crisis, the provisions of the ‘Greek Programme’ have been revised several times, and personal income tax reform has figured prominently on almost each of the revision agendas. This paper aims to provide an assessment of the effects of the four major structural reforms that took place in Greece during and in the aftermath of the economic crisis; using microsimulation techniques, we simulate the (ceteris paribus) first-order impact of these reforms on the distribution of incomes, the state budget and work incentives, while also trying to identify the main gainers and losers of these policy changes. Our results suggest that all reforms had a revenue-increasing rationale, with the one of 2011 being designed to have the largest fiscal gains. The latter also strengthened redistribution and achieved the highest decrease in income inequality. The 2013 reform went to the opposite direction by reducing both the redistributive strength and the progressive nature of the Greek tax system. The striking discrepancies in the ways in which different household categories have been affected by the four reforms call for a deeper investigation of the possibility of moving towards more uniform personal income tax rules.Â
    Date: 2019–12–05
  7. By: Sabrina T. Howell; Filippo Mezzanotti
    Abstract: A central issue in public finance is the tradeoff between maintaining tax revenues and using the tax code to incentivize particular economic activities. One important dimension of this tradeoff is whether incentive policies are used in practice as policymakers intend. This paper examines one particular tax program that many U.S. states use to stimulate entrepreneurship. Specifically, angel tax credits subsidize wealthy individuals’ investments in startups. This paper finds that these programs have no measurable effect on local entrepreneurial activity or beneficiary company outcomes, despite increasing some measures of angel activity. This appears to reflect the programs failing to screen out financially unconstrained firms and often being used for tax arbitrage. Over 90 percent of beneficiary companies fall into at least one of three categories: a corporate insider received a tax credit; the company previously raised external equity; or the company is not in a high-growth sector. Notably, at least 33 percent of beneficiary companies include an investor receiving a tax credit who is an executive at the company.
    JEL: G0 G18 G24 G38 O3
    Date: 2019–11
  8. By: Konopczak, Karolina (Ministry of Finance in Poland)
    Abstract: This article proposes an alternative methodology for estimating changes in the VAT gap that allows for their timely (quarterly) monitoring. It combines two traditions of tax modelling: calculating a discrepancy between theoretical tax liabilities and the amount of tax actually collected, as well as estimating elasticities of tax revenues. In this approach the VAT gap trajectory is associated with a changing elasticity of actual tax revenues with respect to theoretical revenues (or, equivalently, the elasticity of actual revenues corrected for changes in the tax system with respect to the tax base). The method was used to estimate changes in the VAT gap in Poland in years 2016 through 2018. The obtained results indicate that the gap decreased by approximately 21 billion PLN, which accounted for almost half of the increase in VAT revenues during that period. In percentage terms, the gap has narrowed from 20.8% in 2016 (European Commission, 2018) to below 10% at the end of 2018.
    Keywords: VAT gap; tax elasticities; cointegration; ARDL model
    JEL: C22 H24 H26
    Date: 2019–10–16
  9. By: Cattaneo, Maria; Lergetporer, Philipp; Schwerdt, Guido; Werner, Katharina; Woessmann, L.; Wolter, Stefan C.
    Abstract: Do differences in citizens’ policy preferences hamper international cooperation in education policy? To gain comparative evidence on public preferences for education spending, we conduct representative experiments with information treatments in Switzerland using identical survey techniques previously used in Germany and the United States. In Switzerland, providing information about actual spending and salary levels reduces support for increased education spending from 54 to 40 percent and for increased teacher salaries from 27 to 19 percent, respectively. The broad patterns of education policy preferences are similar across the three countries when the role of status-quo and information are taken into account.
    Keywords: policy preferences, cross-country comparison, international cooperation, Switzerland, Germany, United Stated, education spending, information, survey experiments
    JEL: H52 I22 D72 D83
    Date: 2019

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