nep-pbe New Economics Papers
on Public Economics
Issue of 2021‒04‒19
ten papers chosen by
Thomas Andrén

  1. The Value Added Tax Simulation Model: VATSIM-DF (II) By Cristina Cirillo; Lucia Imperioli; Marco Manzo
  2. A Practical Proposal to End Corporate Tax Abuse: METR, a Minimum Effective Tax Rate for Multinationals By Petr Jansky; Alex Cobham; Tommaso Faccio; Javier Garcia-Bernardo; Jeffery Kadet; Sol Picciotto
  3. Can Payroll Tax Cuts Help Firms during Recessions? By Youssef Benzarti; Jarkko Harju
  4. The fiscal impact of immigration in the EU By Christl, Michael; Bélanger, Alain; Conte, Alessandra; Mazza, Jacopo; Narazani, Edlira
  5. Taxation of fuel and vehicles when emissions are constrained By Geir H. M. Bjertnæs
  6. Women's Voice on Redistribution: From Gender Norms to Taxation By Monica Bozzano; Paola Profeta; Riccardo Puglisi; Simona Scabrosetti
  7. Age-Targeted Income Taxation, Labor Supply, and Retirement By Johan Gustafsson
  8. Does stigma against tax avoidance improve social welfare? By Hamamura, Jumpei; Kurita, Kenichi
  9. The private return of R&D tax credit By Pierre Courtioux; Antoine Reberioux; François Métivier
  10. Comparative institutional analysis of poverty-alleviation systems: Does basic income improve social welfare? By Kurita, Kenichi

  1. By: Cristina Cirillo (Ministry of Economy and Finance); Lucia Imperioli (Ministry of Economy and Finance); Marco Manzo (Ministry of Economy and Finance)
    Abstract: This paper describes the VATSIM-DF (II), a non-behavioural microsimulation model on the Value Added Tax (VAT), recently developed to support policy makers in designing VAT related policies in Italy. The most important goals of VATSIM-DF (II) are to estimate actual and expected VAT revenues, assess the VAT incidence on household disposable income, and simulate the distributional effects of changes in fiscal policies. Our results for 2019, at current VAT legislation, confirm the regressivity of VAT with respect to household income. Compared to existing models, the VATSIM-DF (II) has the great advantage of using Tax Register and National Accounts data, which make our model ideal for microsimulation purposes and perfectly consistent with the most updated macroeconomic data. To develop VATSIM-DF (II), we produce an original dataset by merging different data sources. Results for 2019, at current VAT legislation, show the VAT burden on Italian households and confirm the regressivity of VAT. Finally, we test the distributional effect of a revenue neutral reform, with two VAT rates, which applies the reduced VAT rate also to female and babies sanitary products.
    Keywords: redistributive effects, simulation, taxation, Value Added Tax
    JEL: H2 H22 H23
    Date: 2021–03
  2. By: Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Alex Cobham (Tax Justice Network); Tommaso Faccio (Independent Commission for the Reform of International Corporate Taxation, Nottingham University Business School); Javier Garcia-Bernardo (Tax Justice Network, CORPTAX, Charles University in Prague); Jeffery Kadet (Lancaster University UK, International Centre for Tax and Development); Sol Picciotto (University of Washington School of Law in Seattle)
    Abstract: An initiative is needed to break the logjam in the international negotiations to reform taxation of multinational enterprises (MNEs). The explosion of profit shifting observed since the 1990s has resulted in hundreds of billions of dollars of tax revenues being lost around the world each year – but reform efforts have thus far failed to deliver measurable progress on the primary agreed goal of better aligning MNEs’ taxable profits with the location of their real economic activity. More recently, countries have committed also to ensure that MNEs’ global profits are subject to a minimum effective tax rate, but progress towards international agreement remains stalled. Our proposal for a minimum effective tax rate (METR) could be applied to MNEs by any countries that choose to do so, whether they are home to MNEs, host of MNEs, or both. The METR would be compatible with existing tax treaties, but being non-discriminatory it also complies with other international obligations and could be introduced unilaterally. Economic modelling shows the METR would deliver major revenue gains for participating countries, and adoption would also contribute to, rather than impede, momentum for a more comprehensive multilateral agreement.
    Keywords: multinational enterprise; corporate taxation; tax reform; effective tax rate; minimum tax; minimum effective tax rate
    JEL: F23 H25 H32
    Date: 2021–04
  3. By: Youssef Benzarti; Jarkko Harju
    Abstract: This paper estimates the effect of payroll tax cuts on firm-level employment and balance-sheet outcomes during economic downturns. We use two regional payroll tax cuts in Finland as well as the onset of the Great Recession to estimate the effect of the recession on firms treated by the payroll tax cuts compared to a similar control group. When implemented, prior to the Great Recession, we estimate that the payroll tax cuts had limited effects on employment and balance-sheet outcomes of firms located in the treated regions. However, when the recession starts, some of its negative effects were substantially hampered by the previously enacted payroll tax cuts in treated firms. These employment effects are exacerbated for men and low-skilled employees. We also find that sales and profits in treated firms respond differently in treated firms during the recession. We provide some evidence showing that firms that are liquidity con-strained are the ones that exhibit the strongest response. This shows that payroll tax cuts can make firms more resilient during downturns, possibly by relaxing liquidity constraints.
    Keywords: labor costs, place-based policies, great recession, payroll taxes, employment, wages, firms, fiscal multipliers
    JEL: H20 H22 H23
    Date: 2021
  4. By: Christl, Michael; Bélanger, Alain; Conte, Alessandra; Mazza, Jacopo; Narazani, Edlira
    Abstract: The increasing flows of immigrants in Europe over the last decade has generated a range of considerations in the policy agenda of many receiving countries. One of the main considerations for policy makers and public opinions alike is whether immigrants contribute their ”fair” share to their host country tax and welfare system. This paper seeks to answer this question based on an empirical assessment of the net fiscal contributions of immigrants in the 27 EU Member States using EUROMOD, a EU-wide tax-benefit microsimulation model. In addition to the traditional view of the tax-benefit system, we add indirect taxation and in-kind benefits to the analysis of net contributions. Our findings highlight that migrants on average contributed about 250 euro per year more than natives to the welfare state in 2015. However, when we take an average age-specific life-cycle perspective, we find that natives generally show a higher net fiscal contribution than both, intra-EU and extra-EU migrants, while extra-EU migrants contribute on average less than intra-EU migrants.
    Keywords: Migration,Microsimulation,Tax-benefit system,EUROMOD
    JEL: F22 J15 H2 H5
    Date: 2021
  5. By: Geir H. M. Bjertnæs (Statistics Norway)
    Abstract: A tax on fuel combined with tax exemptions or subsidies for fuel-efficient vehicles is implemented in many countries to fulfill the Paris agreement and to curb mileage-related externalities from road traffic. The present study shows that a tax on fuel should be combined with heavier taxation of lowand zero emission vehicles to curb mileage-related externalities and to fulfill emission targets within the transport sector. The emission target is fulfilled by adjusting the CO2-tax component on fuel. The road user charge on fuel is designed to curb mileage-related externalities. The heavier tax on lowand zero emission vehicles prevent motorists from avoiding the road user charge on fuel by purchasing low- and zero emission vehicles.
    Keywords: Transportation; optimal taxation; environmental taxation; global warming
    JEL: H2 H21 H23 Q58 R48
    Date: 2021–03
  6. By: Monica Bozzano; Paola Profeta; Riccardo Puglisi; Simona Scabrosetti
    Abstract: Gender norms, i.e. the role of men and women in the society, are a fundamental channel through which culture may influence preferences for redistribution and public policies. We consider both cross-country and individual level evidence on this mechanism. We find that in countries that are historically more gender-equal the tax system today is more redistributive. At the individual level, we find that in more gender equal countries gender differences in redistributive preferences are significantly larger. This effect is driven by women becoming systematically more favorable to redistribution, while there are no significant changes for men. Interestingly, there is no gender-based difference in preferences for redistribution among left-leaning citizens, while this difference is significant among moderates in the expected direction: ideologically moderate women are more favorable to redistribution than moderate men, and this effect is even stronger among right-leaning individuals.
    Keywords: gender inequality, comparative public finance, tax mix, institutions, historical origins
    JEL: H10 H20 N30 Z18
    Date: 2021
  7. By: Johan Gustafsson
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect is however an increase in life-cycle labor supply and consumption.
    Keywords: retirement age, life cycle, tax heterogeneity, savings consumption, leisure
    JEL: D15 J22 J26
    Date: 2021
  8. By: Hamamura, Jumpei; Kurita, Kenichi
    Abstract: Stigma can restrain tax avoidance. Tax avoidance behavior by multinational firms has become a public economics problem. Tax avoidance by firms may entail a kind of psychological cost, known as stigma. We analyze the impact of a multinational firm's profit shifting by multinational transfer pricing on social welfare using a simple model that assumes the existence of stigma. The results are as follows. First, stigma improves domestic social welfare more than the absence of stigma does. Second, stigma improves global social welfare more than the arm's length principle, which is the OECD consensus on transfer pricing of cross-border transactions. Third, the optimal degree of public exposure increases with the domestic tax rate and foreign market demand. Our study has the following implications. First, our results imply that stigma has implications for improving social welfare. Second, our results imply that regulators should eschew the arm's length principle and instead use stigma to improve the calibration of society as a whole by restricting the behavior of firms, which can cause problems in trade between nations. Third, in our study, because we find that choosing a positive degree of public exposure maximizes domestic social welfare, our results suggest that public exposure effectively stops the decline in social welfare caused by tax avoidance behavior in firms.
    Keywords: tax avoidance, stigma, transfer price, arm's length principle, multinational firm
    JEL: D43 H26 L12
    Date: 2021–04
  9. 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
  10. By: Kurita, Kenichi
    Abstract: In this study, I conduct a comparative institutional analysis of welfare benefits programs and basic income. I compare the social welfare between the two. I find that when basic income is low, it yields higher social welfare than welfare benefits. Also, the total labor supply under the basic income system is larger than that under welfare benefits programs when the welfare benefits level is lower than the critical level.
    Keywords: Comparative institutional analysis; Basic Income; Welfare benefit; Welfare fraud
    JEL: H2 H5 I3
    Date: 2021–04–15

This nep-pbe issue is ©2021 by Thomas Andrén. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.