nep-pbe New Economics Papers
on Public Economics
Issue of 2021‒04‒12
thirteen papers chosen by
Thomas Andrén

  1. Policy Implications of Non-Linear Effects of Tax Changes on Output By Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
  2. The Impact of Taxes and Transfers on Poverty and Income Distribution in South Africa 2014/15 By Maya Goldman; Ingrid Woolard; Jon Jellema
  3. Taxing Property in Developing Countries: Theory and Evidence from Mexico By Anne Brockmeyer; Alejandro Estefan; Karina Ramírez Arras; Juan Carlos Suárez Serrato
  4. Capital Tax Reforms With Policy Uncertainty By Arpad Abraham; Pavel Brendler; Eva Carceles
  5. Household bargaining, spouses'consumption patterns and the design of commodity taxes By Helmuth Cremer; Jean-Marie Lozachmeur; Kerstin Roeder
  6. Public Expenditure and Inclusive Growth - A Survey By Younes Zouhar; Jon Jellema; Nora Lustig; Mohamed Trabelsi
  7. Interactions between income and social support programs in B.C. By Petit, Gillian; Tedds, Lindsay M.
  8. Topics in Tax Policy: Evidence from an Internet Survey in Japan By Tomomi Miyazaki; Masayuki Tamaoka; Ayu Tomita; Keigo Kameda; Akihiro Kawase; Katsuyoshi Nakazawa; Hiroyuki Ono; Naoko Yokoyama
  9. Does digitalisation in public services reduce tax evasion? By Strango, Cristina
  10. View about consumption tax and grandchildren By Eiji Yamamura
  11. Income Assistance in British Columbia: Reforms Along Basic Income Lines By Petit, Gillian; Tedds, Lindsay M.
  12. Drivers of the Tax Effort: Evidence from a Large Panel By Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento
  13. The private return of R&D tax credit By Pierre Courtioux; Antoine Reberioux; François Métivier

  1. By: Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
    Abstract: In an earlier paper, titled "Non-linear effects of tax changes on output: The role of the initial level of taxation," we estimated tax multipliers using (i) a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014, and (ii) the so-called narrative approach developed by Romer and Romer (2010) to properly identify exogenous tax changes. The main finding is that, in line with existing theoretical distortionary and disincentive-based arguments, the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and more negative as the initial tax rate and the size of the change in the tax rate increase. This companion paper first shows that these findings have important policy implications, given that the initial level of taxes varies greatly across countries and thus so will the potential output effect of changing tax rates. The paper then turns to some specific policy applications. It focuses on the relevance of the arguments for revenue mobilization in countries with low levels of provision of public goods and social and infrastructure gaps, as well as in commodity-dependent countries. The paper then considers some practical implications for the standard debt sustainability analysis. Lastly, it evaluates the implications of the findings for the Laffer curve.
    JEL: E32 E62 H20
    Date: 2021–04
  2. By: Maya Goldman; Ingrid Woolard; Jon Jellema
    Abstract: This paper applies the Commitment to Equity (CEQ) Assessment Framework to the 2014/15 Living Conditions Survey for South Africa to analyse the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. The tax and social spending system is progressive - the burden of taxes falls on the richest in South Africa and social spending results in sizable increases in the incomes of the poor. Reductions in poverty and inequality are the largest achieved in the emerging market countries that have so far been included in the CEQ. The analysis by gender shows that the fiscal system is partially responsive to the additional burden of childcare borne by women through social transfers such as the child support grant and public healthcare and education services, and partially responsive to inequality of access to labour opportunities through the progressive direct taxation system. However, these impressive results are partly due to high levels of pre-fiscal inequality in the country and due to valuing in-kind benefits from free government services in education and health at the average cost of provision – they do not take into account the significant variation in the quality of the services provided.
    Keywords: fiscal policy, fiscal incidence, social spending, inequality, poverty, taxes, transfers, education, health, housing, South Africa
    JEL: H22 I38 D31
    Date: 2021–01
  3. By: Anne Brockmeyer; Alejandro Estefan; Karina Ramírez Arras; Juan Carlos Suárez Serrato
    Abstract: Property taxes in developing countries are plagued by noncompliance and can exacerbate liquidity constraints. We characterize optimal enforcement and taxation policies as functions of revenue elasticities and measures of taxpayer hardship. We estimate these parameters using multiple sources of variation and administrative data from Mexico City. Both rate increases and enhanced enforcement raise revenue, but liquidity constraints also shape taxpayer behavior. Despite the presence of liquidity constraints, we find that raising tax rates increases welfare. In contrast, enforcement generates higher private costs than welfare benefits. On the margin, welfare-maximizing governments would prefer to increase tax rates rather than enhance enforcement.
    JEL: H21 H26 H71 O23
    Date: 2021–04
  4. By: Arpad Abraham; Pavel Brendler; Eva Carceles
    Abstract: One important feature of capital tax reforms is uncertainty regarding their duration. We use the Bush Tax cuts as the leading example to illustrate how uncertainty about reform duration may affect the economy’s path and erode political support for the reform. We model policy uncertainty by assuming that the reform may be either repealed or made permanent with some probability at a predetermined date. We show that policy uncertainty is a critical ingredient that can explain why the Bush tax cuts had no economically significant effect on investment, as confirmed empirically by Yagan (2015). While the permanent reform leads to positive aggregate welfare gains on impact, policy uncertainty may reverse this result. These observations hold both in a model with a representative firm and heterogeneous firms, but adding firm heterogeneity generates an interesting implication. In contrast to the permanent reform, policy uncertainty increases the TPF since it dampens investment by mature, less productive firms.
    Date: 2021
  5. By: Helmuth Cremer (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Marie Lozachmeur (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Kerstin Roeder (Universität Augsburg [Augsburg])
    Abstract: We study optimal commodity taxes under household bargaining. We focus on the taxation of ‘female' and ‘male' products. The expressions for the tax rates include Pigouvian and incentive terms. When the female spouse has the lower bargaining weight, the Pigouvian term calls for a subsidization of the ‘female good', and a taxation of the ‘male good'. The incentive term depends on the distribution of bargaining weights across couples. When the bargaining weight of the female spouse increases with wages, the female good will be consumed in larger proportion by more productive couples. In this case the Pigouvian term is mitigated.
    Keywords: Optimal commodity taxation,Household bargaining,Couples' taxation
    Date: 2021
  6. By: Younes Zouhar (International Monetary Fund); Jon Jellema (CEQ Institute); Nora Lustig (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQ).); Mohamed Trabelsi
    Abstract: This paper explores the role of public expenditure in fostering inclusive growth. It starts with a presentation of salient features of public expenditure. Then, it lays out an analytical framework that describes the channels through which public expenditure affects inequality and poverty in the short and long term. Based on a review of the empirical literature, it discusses the policy options. Finally, the paper assesses the role of key factors such as the initial conditions, and the institutions, in shaping the inclusive spending policies.
    Keywords: public expenditure, social spending, inclusive growth, inequality, poverty
    JEL: D63 H50 H51 H52 H53 H54 H55
    Date: 2021–03
  7. By: Petit, Gillian; Tedds, Lindsay M.
    Abstract: This paper examines the system of income and social supports available to B.C. residents and how programs interact with each other. We observe that programs can interact through “eligibility interactions” and “benefit interactions”; that is, one program can affect eligibility for another program and benefits from one program can affect benefits from another program. We look in depth at both the disability tax credit and provincial social assistance and how these programs act as “gateway programs” for other programs: access issues to these gateway programs can limit access to other programs. We also examine the interaction between provincial social assistance and the Rental Assistance Program, both which provide a housing supplement to low-income B.C. residents; however, receipt of one precludes the receipt of the other. For a person deciding between these programs, knowing which program makes a person better off is complicated. Finally, we look at how receipt of the Seniors Bus Pass affects the level of other tax-delivered benefits, and how receiving provincial social assistance benefits affects receipt of the Canada Workers Benefit: for both, the receipt of one benefit reduces the other benefit level raising the question of whether this was intentional. These interaction effects have implications for how reforms should be approached. Reforms to programs are often approached as reforms to individual programs; however, they should be approached with the entire system in mind.
    Keywords: Income supports; social supports; eligibility interactions; benefit interactions; systems interactions
    JEL: H31 H39 I38 I39
    Date: 2020–12
  8. By: Tomomi Miyazaki (Graduate School of Economics, Kobe University); Masayuki Tamaoka (Graduate School of Economics, Kobe University); Ayu Tomita (Graduate School of Economics, Kobe University); Keigo Kameda (School of Policy Studies, Kwansei Gakuin University); Akihiro Kawase (Faculty of Economics, Toyo University); Katsuyoshi Nakazawa (Faculty of Economics, Toyo University); Hiroyuki Ono (Faculty of Economics, Toyo University); Naoko Yokoyama (Faculty of Economics, Osaka Sangyo University)
    Abstract: This paper explains background information and basic descriptive statistics from the follow-up survey of our questionnaire summarized in Miyazaki et al. (2020). We confirm that taxpayers in Japan tend to abide by the rule, and their tax morale is as high as our first survey. However, most of the respondents feel that their perceived tax burden is especially high with respect to consumption tax. Furthermore, more than 40 % of the respondents feel that "ideal" consumption tax rate should be less than 10 % for all cases. Our results reinstate that whereas taxpayers of Japan have high tax morale and their rate of tax compliance is high, their resistance to consumption tax hike is strong.
    Date: 2021–03
  9. By: Strango, Cristina
    Abstract: The aim of paper is to investigate the impact of digitalisation from public services on tax evasion. The analysis targets the European Union 27 (EU-27) member states over the period 2015-2019 by using panel estimators. The findings prove a nonlinear relationship between digitalisation from public services and tax evasion by U-shape. More precisely, the acceleration of digitalisation in public services reduces the level of tax evasion up to a certain point. Once the acceleration reaches that point, the level of tax invasion increases once again.
    Keywords: tax evasion, digitalisation, EU27, panel estimations
    JEL: C23 C89 H26
    Date: 2021–03–28
  10. By: Eiji Yamamura
    Abstract: In Japan, the increase in the consumption tax rate, a measure of balanced public finance, reduces the inequality of fiscal burden between the present and future generations. This study estimates the effect of grandchildren on an older person's view of consumption tax, using independently collected data. The results show that having grandchildren is positively associated with supporting an increase in consumption tax. Further, this association is observed strongly between granddaughters and grandparents. However, the association between grandsons and grandparents depends on the sub-sample. This implies that people of the old generation are likely to accept the tax burden to reduce the burden on their grandchildren, especially granddaughters. In other words, grandparents show intergenerational altruism.
    Date: 2021–02
  11. By: Petit, Gillian; Tedds, Lindsay M.
    Abstract: IA is the Government of British Columbia’s largest income assistance program, with an annual cost of just over $2B and reaching more than 8% of households. It is a program that is very complex to access and has complex eligibility rules and design features. It is also associated with a large amount of stigma and does not foster the financial stability and financial security of its clients. IA is also a poor tool to support those who engage in vital unpaid work (e.g., child care; caregiving for ill, disabled, or elderly family members; volunteering), not only because of the stigma associated with the program but also because the benefit levels are inadequate. The purpose of this paper is to put the IA program through the lens of BI principles to recommend reforms that would move IA closer to BI principles and away from being a “funder of last resort.” Taken together, reforms based on BI principles should make IA a more inclusive program that recognizes the worth of all people. These reforms will also help reduce income poverty rates and poverty depths, preventing poverty, and help those caught in or about to be caught in a poverty trap.
    Keywords: Income assistance; social assistance; program reforms; basic income; poverty reduction; cycle of poverty
    JEL: H3 H31 I38 I39
    Date: 2020–12
  12. By: Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento
    Abstract: This paper extends previous literature by assessing the drivers of tax effort in a large panel of 122 countries over the period 1980 to 2017 and refining the analysis to regions, periods, income group, and economic development level. Our focus is on five blocks of determinants, namely: economic, fiscal, openness, structural, and political. We find that tax effort is influenced by all blocks, although results differ per income group. Tax effort in advanced economies is driven by all blocks of drivers, except political variables, while openness, structural, and political blocks prevail in developing economies. There is no consistency regarding the determinants across the four regions (Latin America, Africa, Europe and Asia). We also find that during the first two decades under analysis, tax effort is mainly associated with both higher levels of countries’ tax revenues and the role of the agricultural sector in the economy, while from 1999 onwards the determinants are mainly driven by left-wing ruling governments and the economic and fiscal blocks of variables. Our results are robust for a battery of sensitivity and robustness tests. Taken all together, our findings suggest the existence of heterogeneous impacts, which implies that policies resulting in improvements in the level of tax effort can affect countries in different ways.
    Keywords: tax effort; fiscal policy; economic development
    JEL: H21 O10 O40
    Date: 2021–04
  13. By: Pierre Courtioux (PSB - Paris School of Business, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Antoine Reberioux (UP Médecine Paris Centre - Université de Paris - Faculté de Médecine Paris Centre - UP - Université de Paris, LADYSS - Laboratoire Dynamiques Sociales et Recomposition des Espaces - UP - Université de Paris - UPN - Université Paris Nanterre - UP8 - Université Paris 8 Vincennes-Saint-Denis - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Paris 1 Panthéon-Sorbonne); François Métivier (UP Médecine Paris Centre - Université de Paris - Faculté de Médecine Paris Centre - UP - Université de Paris, IPGP - Institut de Physique du Globe de Paris - INSU - CNRS - Institut national des sciences de l'Univers - IPG PARIS - UR - Université de La Réunion - CNRS - Centre National de la Recherche Scientifique - UP - Université de Paris)
    Abstract: This article examines the private return on R&D tax credit, defined as the ratio of total tax reliefs obtained by a firm through R&D tax credit to real R&D spending. Based on a dataset merging different sources for French companies, we first show that the distribution of this private return is dispersed. We then use clustering analyses to identify six mutually exclusive types of firms' R&D strategies. We finally show in a regression setting that these strategies explain part of the variance in the private return on R&D tax credit. This study contributes to a better understanding of the heterogeneity of firms' R&D strategies. It also seeks to open new directions in debates surrounding the proper design and reforms of R&D tax credit schemes.
    Keywords: firm heterogeneity,R&D,tax credit,firm strategies
    Date: 2021–03

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