nep-pbe New Economics Papers
on Public Economics
Issue of 2021‒11‒08
twelve papers chosen by
Thomas Andrén

  1. The Distribution of Major Tax Expenditures in 2019 By Congressional Budget Office
  2. Taxation of Multinationals: Design and Quantification By Sébastien Laffitte; Julien Martin; Mathieu Parenti; Baptiste Souillard; Farid Toubal
  3. How do investors value the publication of tax information? Evidence from the European public country-by-country reporting By Müller, Raphael; Spengel, Christoph; Weck, Stefan
  4. Optimal Redistribution in the Presence of Signaling By Bastani, Spencer; Blumkin, Tomer; Micheletto, Luca
  5. Who pays for a Value Added Tax Hike at an International Border? Evidence from Mexico By Emmanuel Chavez; Cristobal Dominguez
  6. Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977-2018 By Hérault, Nicolas; Jenkins, Stephen P.
  7. Promoting Self-employment:Does it create more Employment and Business Activity? By Gilbert Cette; Jimmy Lopez
  8. Education and Tax Policies in the Presence of Informality By Tkhir, Anna-Mariia
  9. Temporary VAT Reduction during the Lockdown - Evidence from Germany By Clemens, Marius; Röger, Werner
  10. Financial Support for Young Adults Through Tax and Social Transfers – Defamilialisation Scenarios By Adélaïde Favrat; Vincent Lignon; Muriel Pucci
  11. Financing Universal Health Care: Premiums or Payroll Taxes? By Feldman, Maria; Fehr, Hans
  12. Redistributive policies in general equilibrium By George Economides; Apostolis Philippopoulos; Stylianos Sakkas

  1. By: Congressional Budget Office
    Abstract: CBO examined how the benefits from major tax expenditures in the individual income tax and payroll tax systems were distributed among households in different income groups in 2019. The agency estimates that those tax expenditures totaled about $1.2 trillion, or 5.8 percent of gross domestic product, and accounted for roughly three-quarters of the total budgetary effects of all tax expenditures that year. The size and distribution of benefits across the income scale varied considerably among each of the major tax expenditures in 2019.
    JEL: H20 H24 H50
    Date: 2021–10–27
  2. By: Sébastien Laffitte (CEPS - Centre d'Economie de l'ENS Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - Université Paris-Saclay); Julien Martin (CEPR - Center for Economic Policy Research - CEPR); Mathieu Parenti (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Baptiste Souillard (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Farid Toubal (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Minimum corporate taxation is the second Pillar of the reforms of international corporate taxation. It is a simple and powerful tool that could curb profit shifting towards low or no tax jurisdictions. Its implementation would allow France to tax the profits that French headquarters have shifted to tax havens, but also to reduce the erosion of its tax base. We estimate the French corporate income tax (CIT) revenues would increase by almost 6 billion euros in the short run after the implementation of an effective minimum tax rate of 15% and by 8 billion euros at a rate of 21%. CIT gains may vary substantially depending on the scope of the tax base, the possibility of headquarters' inversion, and whether it includes domestic corporations or not. CIT gains are relatively higher in France than in Germany or the United States. The expected gains are substantially larger than those to be expected from the implementation of the first Pillar of the reform in its version proposed by the US in April 2021, which opens up rights to tax the 100 largest corporations in the world according to their sales' destination. According to our estimates, Pillar One would bring in about 900 million euros for France.
    Keywords: Tax rate,multinational corporation,reform
    Date: 2021
  3. By: Müller, Raphael; Spengel, Christoph; Weck, Stefan
    Abstract: We examine the capital market reaction to the announcement of the European Union (EU) to introduce a public tax country-by-country reporting (CbCR) regime. By employing an event study methodology, we find a significant cumulative average abnormal return (CAAR) of -0.699%, which translates into a monetary value drop of approximately EUR 65 billion. We conclude that investors evaluate reputational risks arising from public scrutiny and competitive disadvantages to outweigh potential benefits of an extended information environment or more sustainable corporate tax strategies. In cross-sectional tests, we find that the average investor reaction is more pronounced for firms with low effective book tax rates, indicating that reputational concerns play a significant role in the marginal investor's investment behavior. Furthermore, our cross-sectional results indicate that the market reaction is stronger for firms operating in industries with high growth in market participants, providing an initial indication for the role of the competitive environment as an additional channel. Our inferences are of particular importance in light of the current ongoing debates on similar disclosure rules (particularly in the United States; cf. "Disclosure of Tax Havens and Offshoring Act") as well as for sustainability standard setters.
    Keywords: tax transparency,tax disclosure,tax avoidance,event study,country-by-country reporting
    JEL: F23 G14 G38 H25 H26 M41
    Date: 2021
  4. By: Bastani, Spencer (Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala); Blumkin, Tomer (Department of Economics, Ben Gurion University); Micheletto, Luca (Department of Law, University of Milan, and Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University; UCFS; CESifo, Germany)
    Abstract: We analyze optimal redistribution in the presence of labor market signaling where innate productive ability is not only unobserved by the government, but also by prospective employers. Our model features signaling in both one and two dimensions, where in the latter case firms have an informational advantage vis-a-vis the government. Focusing on signals in the context of educational attainment, we analyze the dual role of income taxation in redistributing income and affecting signaling incentives as well as the role of extended tax systems that combine income taxation with direct taxes on the signals in the form of education taxes/subsidies. We demonstrate how the government can achieve redistribution through wage compression and analyze the conditions under which such redistribution is feasible and socially desirable.
    Keywords: Nonlinear taxation; Education; Asymmetric information; Human capital
    JEL: D82 H21 H52 J31
    Date: 2021–11–01
  5. By: Emmanuel Chavez (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Cristobal Dominguez (Comision Nacional Bancaria y de Valores)
    Abstract: This research studies the effects of a value added tax (VAT) reform at Mexico's international frontiers. The reform raised the VAT rate from 11 to 16 percent at localities close to the international borders. We use the traditional "static" difference-in-differences methodology as well as dynamic difference-in-differences. The treatment group is composed of municipalities in the area where the VAT increased, and the control group is composed of municipalities close to the treatment group. We nd that the VAT hike had a positive effect on prices of around half the size of the full pass-through conter-factual. In addition, the reform had a negative effect on workers' wages and no effect on employment. The negative e ect on workers' real incomes is not smoothed out with credits. We nd evidence of a negative effect on consumption at Mexico's northern border due to the reform. However, we nd no evidence of an increase in shopping at the United States side of the border.
    Keywords: Worker purchasing power,Value Added Tax,Taxation,Border Crossing
    Date: 2021–09
  6. By: Hérault, Nicolas; Jenkins, Stephen P.
    Abstract: We apply the Kakwani approach to decomposing redistributive effect into average rate, progressivity, and reranking components using yearly UK data covering 1977-2018. We examine cash and in-kind benefits, and direct and indirect taxes. In addition, we highlight an empirical implementation issue - the definition of the reference ('pre-fisc') distribution. Drawing on an innovative counterfactual approach, our empirical analysis shows that trends in the redistributive effect of cash benefits are largely associated with cyclical changes in average benefit rates. In contrast, trends in the redistributive effects of direct and indirect taxes are mostly associated with changes in progressivity. For in-kind benefits, changes in the average benefit rate and progressivity each played the major roles at different times.
    Keywords: Kakwani decomposition,inequality,redistributive effect,progressivity,reranking,benefits,taxes
    JEL: D31 H24
    Date: 2021
  7. By: Gilbert Cette; Jimmy Lopez
    Abstract: We assess the economic impact of reforms promoting self-employment in the three countries that have implemented such reforms since the early 2000s: the Netherlands, the United Kingdom and France. To that end, we use an unbalanced cross country-industry dataset of 4,226 observations, including 12 OECD countries and 20 market industries, over the 1995-2016 period. We first observe, using country-level data, that the share of self-employed workers in total employment is quite stable or declines over the period in all countries in our dataset, except in the three countries where large reforms promoting self-employment have been implemented, and only after these reforms. We econometrically confirm this impact on self-employment in our set of 20 industries and we find that, at the end of the period, the reforms may have increased the share of self-employed workers in total employment by 5.5pp on average in the Netherlands, 2.5pp in the United Kingdom and 2pp in France. Then, we investigate the impact of reforms on total employment and value added using a difference-in-differences approach. In spite of a broad sensitivity analysis, we find no evidence that the reforms may have impacted either total employment or value-added.These results suggest that the reforms promoting self-employment may have raised the number of self-employed workers, but mostly through a substitution effect between the self-employed and employees, and not through a supply effect or a substitution effect with informal activities. This means that the reforms may have failed to achieve their main objectives.
    Keywords: Self-employment, Entrepreneurship, Structural Reforms.
    JEL: H24 J21 J38 K31
    Date: 2021
  8. By: Tkhir, Anna-Mariia
    JEL: I24 E26 J24
    Date: 2021
  9. By: Clemens, Marius; Röger, Werner
    JEL: E62 E65 H2
    Date: 2021
  10. By: Adélaïde Favrat (cnaf - caisse nationale des allocations familiales - Ministère de la santé); Vincent Lignon (UPVD - Université de Perpignan Via Domitia); Muriel Pucci (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper assesses the support provided by the tax and social security system to young adults aged 18-24, distinguishing between the direct benefits they receive and the transfers channelled through their parents, whether in the form of increases in social security benefits or tax savings. Using the MYRIADE microsimulation model, we estimate that nearly 50% of the support provided to young adults aged 18-24 is channelled through their parents. Illustrating the familialist model that underlies support to young adults in France, indirect transfers tend to be higher in the upper deciles than in the middle deciles, raising questions of fairness. To assess their redistributive properties, the paper examines the effect of redeploying indirect support in the form of an individualised allowance paid directly to young adults. In the two scenarios envisaged, redeployment is found to reduce the average poverty risk and the differences in living standards among young adults, but to penalise some young adults from low-income families still in education.
    Abstract: L'article évalue les aides apportées par le système socio‑fiscal aux jeunes âgés de 18 à 24 ans, en distinguant les prestations dont ils bénéficient en leur nom des transferts qui transitent par leurs parents via des majorations de prestations sociales ou des économies d'impôt. À l'aide du modèle de microsimulation MYRIADE, nous estimons que près de 50 % des aides à destination des 18‑24 ans transitent par leurs parents. Ces transferts indirects, qui confirment la logique familialiste de l'aide aux jeunes en France, sont plus importants dans les déciles supérieurs que dans les déciles intermédiaires, ce qui peut poser des problèmes d'équité. Pour évaluer leurs propriétés redistributives, nous testons l'impact d'un redéploiement de ces aides indirectes sous la forme d'une allocation individualisée directement versée aux jeunes adultes. Dans les deux scénarios envisagés, un tel redéploiement réduirait le risque de pauvreté moyen et l'hétéro généité des niveaux de vie des jeunes, mais pénaliserait certains jeunes en cours d'études appartenant à des familles modestes.
    Keywords: Redistribution,Microsimulation,Family policies,Support for young adults,microsimulation,microsimulation support for young adults,family policies,redistribution,politiques familiales,aides aux jeunes,Aides aux jeunes,Politiques familiales
    Date: 2020
  11. By: Feldman, Maria; Fehr, Hans
    JEL: C68 D91 H55 J24
    Date: 2021
  12. By: George Economides (Athens University of Economics and Business); Apostolis Philippopoulos (Athens University of Economics and Business); Stylianos Sakkas (European Commission - JRC)
    Abstract: We develop a general equilibrium OLG model to evaluate a wide menu of popular redistributive policies in a unified context. We work in two steps: First, we study how initial conditions in human and financial capital, as inherited from family background, shape individuals' human capital, and hence their work opportunities, income and wealth, and eventually macroeconomic outcomes. Second, we study which policies can reduce this type of inequality without, hopefully, damaging macroeconomic efficiency.
    Keywords: Inequality, efficiency, government expenditures, public policy.
    JEL: D63 H21 H50
    Date: 2021–10

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