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on Public Economics |
| By: | Harashima, Taiji |
| Abstract: | In this paper, I present a rationale for an inheritance tax from the point of view of economic rents derived from ranking value and preference in the state of simultaneous optimality of all heterogeneous households. Because there are family lines that have different probabilities of persistently obtaining rents, these rents should be sufficiently taxed to achieve optimality of all heterogeneous households. Income taxes alone cannot completely remove the negative effects of these rents on optimality because it is difficult to distinguish between types of income. Therefore, an inheritance tax is necessary to complement income taxes. An important point is that the inheritance tax is not a tax on capital income—it is a tax on rents. Because sustainable heterogeneity indicates optimality in a heterogeneous population, this type of inheritance tax does not distort the economy. Rather, unless the negative effects of these rents are sufficiently removed by an inheritance tax, the economy is distorted and most households cannot achieve optimality. |
| Keywords: | Economic rent; Income tax; Inheritance tax; Inequality; Ranking value and preference; Sustainable heterogeneity |
| JEL: | D63 H21 H24 |
| Date: | 2020–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100015&r=all |
| By: | Dmitri Jegorov; Anna Leszczyłowska; Aleksander Łożykowski |
| Abstract: | Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? |
| Keywords: | corporate income tax, distributed profit tax, dividend tax, cash flow tax, Estonia |
| JEL: | H25 H32 M48 |
| Date: | 2020–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:sec:mbanks:0163&r=all |
| By: | Uribe-Tera\x{0301}n, Carlos; Gachet, Iva\x{0301}n; Grijalva, Diego F. |
| Abstract: | This paper studies the design and welfare implications of an optimal age-dependent taxation scheme for an emerging economy. The setting is an overlapping generations economy with uninsured productivity risk, partially insured occupational risk (unemployment and informality by exclusion), stochastic retirement, and stochastic access to the pension fund. We calibrate this model for Ecuador and find that the optimal tax scheme provides a payroll tax exemption up to age 35, thereafter becoming hump-shaped with a maximum tax rate of 50% at age 50. The progressive tax levied on labor income implies an initial marginal tax rate of 5% that increases linearly to a top marginal tax rate of 35%. This tax scheme produces a welfare gain of 2.9% measured in compensated equivalent units and reduces wealth inequality by 5.8%. For comparison, in a model built and calibrated for the US economy (no informality, higher productivity and longevity risk, and full coverage of the social security system), the optimal payroll tax implies a zero tax rate up to age 27, becoming hump-shaped thereafter with a maximum tax rate of 56.2% at age 46. |
| Keywords: | Economía, Finanzas, Impuestos, |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1568&r=all |
| By: | Ahmed Ahmed; Anna Zabai |
| Abstract: | We document that corporate pension contributions respond to tax-based incentives using the 2017 Tax Cut & Jobs Act (TCJA) as a natural experiment. The TCJA cut the U.S. federal corporate tax rate, temporarily increasing contribution incentives for sponsors of defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to these incentives. We find that the tax break induced an extra $3 billion of sponsor contributions to medium- and large-scale plans in 2017. But we also find strong evidence of a reversal, both in terms of sponsor contributions and plan funding ratios by 2018. We find no evidence of impact on plan asset allocations. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds. |
| Keywords: | defined-benefit pension plans, contributions, Tax Cuts & Jobs Act |
| JEL: | H22 H25 H26 H32 J32 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:863&r=all |
| By: | Michael Christl (European Commission - JRC); Monika Koeppl-Turyna; Hanno Lorenz; Dénes Kucsera |
| Abstract: | The aim of this study is to analyze redistribution within the Austrian tax-benefit system. In this work we take a comprehensive view and include not only direct taxation and cash benefits, but also indirect taxes and in-kind transfers. We look at two kinds of redistribution: between the households belonging to different income groups, and between generations, taking the life-cycle perspective. Our analysis shows that indirect taxes, as known from the previous literature, have a regressive effect on the tax-benefit system. On the contrary, in-kind benefit seem to have a progressive effect. To analyse the impact of both, we extend our income concept by both, indirect taxes and in-kind benefits. If we look on the distributional impact, we find that the inequality-enhancing effect of indirect taxes is more than off-set by the inequality-reducing effect of in-kind benefits. The Gini coefficient increases from 0.24 to 0.26 due to indirect taxes, but when adding in-kind benefits, the Gini coefficient is reduced to 0.23. The overall effect of both, indirect taxes and in-kind benefits is progressive. |
| Keywords: | tax-benefit model, microsimulation, EUROMOD, welfare state, Austria, in-kind benefits, taxation |
| JEL: | I38 H24 D31 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202002&r=all |
| By: | Raymundo M. Campos-Vazquez |
| Abstract: | Despite evidence of high inequality and low social mobility throughout the world, there has been only limited demand for change. Using new survey and experimental data, we investigate how perceptions about inequality and social mobility affect preferences for redistribution in Mexico. In addition to the perceived level of inequality typically measured in previous studies, we explore perceptions about who is rich and poor and their share of the population. The shape of perceived inequality that we find provides new insights as to why people tolerate large differences between the rich and the poor. We find that Mexicans generally perceive poverty and inequality not too far from measured levels, but they overestimate the income of the rich and their proportion of the population. Their perceptions of social mobility correctly estimate persistence rates at the top and bottom of the distribution, but they overestimate upward and downward mobility. Providing people with more information about observed income inequality and social mobility is one way to encourage a demand for redistribution. However, randomly providing selected participants with this information has almost zero effect on their desired levels of equality, social mobility, and tax rates. We measure the degree of tax progressiveness people want and calculate whether it is consistent with the level of equality they seek. We find that Mexicans want a progressive tax system in which the poor pay an average tax rate of 14% and the wealthy pay 41%, and that preference for a more progressive tax structure is negatively related to wealth. Our analysis shows, however, that the post-tax but pre-transfer income distribution respondents want is not consistent with these tax rates. |
| Keywords: | Mexique |
| JEL: | Q |
| Date: | 2020–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:avg:wpaper:en10822&r=all |
| By: | Erard, Brian; Langetieg, Patrick; Payne, Mark; Plumley, Alan |
| Abstract: | Much of the tax compliance literature focuses on taxpayers who choose to underreport their income when they file their tax returns. In this paper, we instead concentrate on those individuals who take the ultimate compliance shortcut of not filing a return at all – a group commonly referred to as “ghosts” by academics, tax administrators, and policy-makers. To learn more about this relatively understudied population, we undertake a detailed analysis of administrative data and Census survey data spanning the period from 2001 through 2013. Our results indicate that 10-12 percent of taxpayers with a US federal filing requirement fail to submit a timely income tax return in any given year, and 6.5-8 percent never file at all. The federal tax gap associated with these ghosts is substantial, amounting to an estimated $37 billion per year. We employ a novel pooled time-series cross-sectional econometric methodology to examine the drivers of late filing and nonfiling behavior. The results establish that filing compliance is influenced by income visibility as well as financial incentives, such as refundable credits, tax rebates, and the monetized filing burden. In addition, we find strong evidence of socio-economic and demographic influences. Our results also reveal substantial persistence in filing behavior. The estimated likelihood of filing a timely return for the current tax year is estimated to be 45 percentage points higher if the taxpayer filed a return for the preceding year. At the same time, we find that one-time financial incentives have only a temporary impact on filing compliance, overturning the prevailing view that, once an individual is brought into the tax system, that individual will continue to file in subsequent years. |
| Keywords: | Tax Compliance, Tax Evasion, Nonfilers, Ghosts, Income Tax, Qualitative Response Models, Discrete Choice Analysis |
| JEL: | C35 H24 H26 H31 |
| Date: | 2020–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100036&r=all |
| By: | Johannes Hermanus Kemp |
| Abstract: | The elasticity of taxable income is a key tax policy parameter that plays an important role in the formulation of tax and transfer policy. This paper extends work by Kemp (2019) by using a new panel of individual tax returns and the phenomenon of 'bracket creep' to produce updated estimates of the elasticity of taxable income for South Africa. Whereas the previous work focused on assessed taxpayers (i.e. |
| Keywords: | Fiscal policy, Elasticity, taxable income, optimal tax |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-29&r=all |
| By: | Ada Jansen; Winile Ngobeni; Alexius Sithole; Wynnona Steyn |
| Abstract: | A key objective of many governments is to improve tax revenue mobilization. One way to achieve this is by improving tax compliance. This requires accurate knowledge of the tax gap, i.e. the difference between what should be paid and what is actually paid. Until now, tax gaps have been primarily estimated in developed countries, and very little is known about tax gaps in developing countries. Information about these gaps can help policy makers make appropriate revenue mobilization strategies. This paper uses a top-down approach to estimate the tax gap in corporate income tax in South Africa. |
| Keywords: | corporate income tax, Tax compliance, tax gap, top-down approach |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-40&r=all |
| By: | Stephan Zheng; Alexander Trott; Sunil Srinivasa; Nikhil Naik; Melvin Gruesbeck; David C. Parkes; Richard Socher |
| Abstract: | Tackling real-world socio-economic challenges requires designing and testing economic policies. However, this is hard in practice, due to a lack of appropriate (micro-level) economic data and limited opportunity to experiment. In this work, we train social planners that discover tax policies in dynamic economies that can effectively trade-off economic equality and productivity. We propose a two-level deep reinforcement learning approach to learn dynamic tax policies, based on economic simulations in which both agents and a government learn and adapt. Our data-driven approach does not make use of economic modeling assumptions, and learns from observational data alone. We make four main contributions. First, we present an economic simulation environment that features competitive pressures and market dynamics. We validate the simulation by showing that baseline tax systems perform in a way that is consistent with economic theory, including in regard to learned agent behaviors and specializations. Second, we show that AI-driven tax policies improve the trade-off between equality and productivity by 16% over baseline policies, including the prominent Saez tax framework. Third, we showcase several emergent features: AI-driven tax policies are qualitatively different from baselines, setting a higher top tax rate and higher net subsidies for low incomes. Moreover, AI-driven tax policies perform strongly in the face of emergent tax-gaming strategies learned by AI agents. Lastly, AI-driven tax policies are also effective when used in experiments with human participants. In experiments conducted on MTurk, an AI tax policy provides an equality-productivity trade-off that is similar to that provided by the Saez framework along with higher inverse-income weighted social welfare. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2004.13332&r=all |
| By: | Bick, Alexander (Arizona State University); Fuchs-Schündeln, Nicola (Goethe University Frankfurt); Lagakos, David (National Bureau of Economic Research); Tsujiyama, Hitoshi (Goethe University Frankfurt) |
| Abstract: | Why are average hours worked per adult lower in rich countries than in poor countries? We consider two natural explanations: income effects in preferences, in which leisure becomes more valuable when income rises, and distortionary tax systems, which are more prevalent in richer countries. To assess the importance of these two forces, we build a simple model of labor supply by heterogeneous individuals and calibrate it to match international data on labor income taxation, government transfers relative to GDP, and hours worked per adult. The model predicts that income effects are the main driving force behind the decline of average hours worked with GDP per capita. We reach a similar conclusion in an extended model that matches cross-country patterns of labor supply along the extensive and intensive margins and of the prevalence of subsistence self-employment. |
| Keywords: | income effects, hours worked, taxation |
| JEL: | E24 J22 O11 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13156&r=all |
| By: | Bastani, Spencer (Linnaeus University); Waldenström, Daniel (Research Institute of Industrial Economics, Stockholm) |
| Abstract: | We analyze the relationship between cognitive ability and bunching in the context of a large and salient kink point of the Swedish income tax schedule. Using population-wide register data from the Swedish military enlistment and administrative tax records, we find that high-ability individuals bunch more than low-ability individuals. This ability gradient is stronger for the self-employed, but is also present among wage earners. We also use high-school GPA and math grades to analyze gender differences, finding a stronger ability gradient among men. |
| Keywords: | bunching, ability, skills, complexity, optimal taxation |
| JEL: | H21 H24 J22 J24 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13141&r=all |
| By: | Ufuk Akcigit; Stefanie Stantcheva |
| Abstract: | Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones. |
| JEL: | H21 H23 H25 O31 O33 O34 O38 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27109&r=all |
| By: | Estian Calitz; Eva Muwanga-Zake; Alexius Sithole; Wynnona Steyn |
| Abstract: | Nowadays, tax depreciation allowances are used less as instruments of macroeconomic stabilization and more as long-term measures to stimulate investment. This paper tabulates the types of accelerated depreciation allowances in South Africa and calculates the magnitude of these benefits in addition to standard across-the-board accounting depreciation by companies. Using anonymized tax assessment data from the South African Revenue Service, the analysis generates the aggregate and sectoral composition of tax depreciation and tax investment allowances for 2014?17. |
| Keywords: | tax depreciation allowances, tax investment allowances, tax expenditures, corporate income tax |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-49&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 consequence of the revolution of internet and digital is the erosion of taxe bases. The creation of value has shift from the production of tangibles to intangibles. This resulted in the disparition of tax bases. But the recognition of this phenomenon does not imply to radically question the relevance of tax instruments inherited from the fordist period. It may simply lead to the proposition of new rules or new taxes aiming to compensate revenue losses. The first part of the paper is devoted to a review of the economic approaches of the taxation of digital for which the mobility of activities and the erosion of tax bases are essential issues. This immediately puts the tax issue on an international level and raises the question of the taxation of rents massively captured by digital companies. In the second part, and after a brief presentation of the main characteristics of the tax system inherited from the Fordist period, we study the main developments that took place during this period. Finally, we emphasize the main lines of the changes affecting capitalism. They cause the present lack of adjustment between the economic bases of capitalism and the tax system. This new capitalism works by deterritorializing the tax bases. |
| Abstract: | La révolution de l'internet et du numérique provoque l'érosion des bases taxables. Le déplacement de la création de valeur des biens tangibles vers des productions intangibles ou immatérielles aboutit à la disparition de l'assiette de l'impôt. Mais l'identification de ce phénomène ne débouche pas nécessairement sur une mise en cause radicale de la pertinence des instruments fiscaux hérités de la période fordiste. Elle peut aussi conduire simplement à la proposition de règles nouvelles ou de prélèvements nouveaux compensant les pertes de recettes. La première partie de l'article est consacrée à une revue des approches économiques de la fiscalité du numérique pour lesquelles la mobilité des activités et l'érosion des bases taxables sont un enjeu essentiel. Cela place immédiatement la question fiscale à un niveau international et interpelle sur la taxation des rentes massivement captées par les entreprises du numérique. Dans une seconde partie et après une rapide présentation des caractéristiques de l'architecture des prélèvements obligatoires héritées de la période fordiste, on étudie les principales évolutions intervenues au cours de cette période. Enfin on distingue les caractéristiques majeures de la mutation du capitalisme en cours qui contribuent à l'actuel défaut d'ajustement entre les nouvelles bases économiques du capitalisme et le système fiscal. Ce nouveau capitalisme fonctionne par déterritorialisation des bases taxables. |
| Keywords: | Digital economy,Corporate taxation,Global taxes,Taxable bases,New capitalism,Economie numérique,Impôt sur les sociétés,Taxes globales,Assiette taxable,Nouveau capitalisme |
| Date: | 2019–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02276269&r=all |
| By: | Arlashkin, Igor (Арлашкин, Игорь) (The Russian Presidential Academy of National Economy and Public Administration); Barbashova, Natalia (Барбашова, Наталья) (The Russian Presidential Academy of National Economy and Public Administration); Komarnitskaya, Anna (Комарницкая, Анна) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | The paper considers approaches employed to assess the tax potential of subnational entities in Switzerland, Italy, and India. It analyzes the composition of taxes that are taken into account in assessing tax potential, assessment methods, formulae and coefficients, stimulating effects, and assessment results. |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:032029&r=all |