nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒04‒04
nine papers chosen by
Thomas Andrén

  1. Fiscal externalities in multilevel tax structures: Evidence from concurrent income taxation By Federico Revelli; Tsung-Sheng Tsai; Roberto Zotti
  2. Using the Value Added Tax for Redistributive Purposes in Italy: Is it Still Worth? By Paolo Liberati; Federica Lanterna
  3. Dividend Imputation, Investment and Capital Accumulation in Open Economies By Chung Tran; Sebastian Wende
  4. Immovable Property Taxation for Sustainable and Inclusive Growth By Alexander Leodolter; Savina Princen; Aleksander Rutkowski
  5. Taxing the Gender Gap: Labor Market Effects of a Payroll Tax Cut for Women in Italy By Enrico Rubolino
  6. Compliance Risk Management: Developing Compliance Improvement Plans By Mr. John D Brondolo; Annette Chooi; Trevor Schloss; Anthony Siouclis
  7. Taxation of part-time work in the OECD By Michelle Harding; Dominique Paturot; Hannah Simon
  8. To consolidate or not to consolidate? A multi-step analysis to assess needed fiscal sustainability By Antonio Afonso; Jose Alves; Joao Tovar Jalles
  9. Federal Financial Support for Public Transportation By Congressional Budget Office

  1. By: Federico Revelli (Department of Economics and Statistics "S. Cognetti de Martiis," University of Torino, Campus Luigi Einaudi); Tsung-Sheng Tsai (Department of Economics, National Taiwan University); Roberto Zotti (Department of Economics and Statistics "S. Cognetti de Martiis," University of Torino, Campus Luigi Einaudi)
    Abstract: This paper exploits the multi-tiered structure of personal income taxation in Italy to investigate within-tier (horizontal) and between-tiers (vertical and diagonal) fiscal externalities. Estimation of an unrestricted income tax reaction function on municipalities located at internal regional borders using off-border Wald-type grouping variables as well as the staggered schedule of mayoral elections as instruments for endogenous spatial lags reveals strong positive spatial dependence in municipal tax rates. On the other hand, there is no evidence of a response of municipal tax rates to regional tax policies, suggesting that border discontinuity estimators that rely on consolidated spatial specifications (lower-plus-upper-tier tax rates) impose restrictions on the parameters of the reaction function that are unwarranted in these circumstances.
    Keywords: fiscal externalities; income taxation; grouping instrumental variable; border discontinuity estimator
    Date: 2022–01
  2. By: Paolo Liberati; Federica Lanterna (University Roma Tre, Department of Economics)
    Abstract: This paper shows that a Vat structure with multiple tax rates in Italy is not the most effective way to pursue redistributive aims. As the tax revenue of the Italian Vat is particularly affected by the use of reduced tax rates and exemptions, compared to other European countries, we suggest that a shift to a uniform Vat associated to cash transfers to households with children might better achieve redistributive targets on the neediest part of the population. This outcome could even be potentially improved by considering that a uniform Vat may significantly reduce Vat evasion due to the difference of tax rates applied to sales and purchases.
    Keywords: Vat, Redistribution, Cash transfers, Italy
    JEL: H25 H20 H23
    Date: 2022–02
  3. By: Chung Tran; Sebastian Wende
    Abstract: A dividend imputation system is designed to address double taxation of capital income by allowing companies to pass on profit taxes paid at the corporate level to shareholders in form of franking tax credits. In this paper, we study implications of dividend imputation in a small open economy model with firm heterogeneity and an internationally integrated capital market. Our analysis indicates that dividend imputation has opposing effects on investment and capital accumulation. On one hand, it mitigates the adverse effects of double taxation and induces more saving and investment; on other hand, it raises the cost of investment for firms that are not fully imputed, which subsequently results in less investment. Moreover, different tax treatments for resident and foreign investors amplify frictions in reallocation of capital across firms, which prevents inflows of foreign capital from fully offsetting the shortage of domestic savings. International investors are not marginal investors in our small open economy setting. Overall, the net effect on capital accumulation is analytically ambiguous, depending on which force is dominant. Our quantitative results indicate that the positive force is dominant and removing dividend imputation leads to decreases in domestic savings, aggregate capital and output. Interestingly, the overall welfare effect is positive as low income households benefit more from additional government transfers, while tax burdens are shifted towards high income households and foreign investors.
    Keywords: Double taxation; Franking tax credit; Fiscal policy; Firm heterogeneity; Overlapping generations; Open economy; Dynamic general equilibrium; Welfare.
    JEL: D21 E62 H21 H22 H25
    Date: 2022–03
  4. By: Alexander Leodolter; Savina Princen; Aleksander Rutkowski
    Abstract: A well-designed recurrent tax on residential property (RRPT) can be an important element of the tax mix being able to foster growth, address policy issues related to inequality and contribute to the green transition. Nevertheless, tax revenues from recurrent property taxes are low in EU Member States. The paper first examines the design of efficient property taxation, which also includes removing the homeownership bias in taxation. Subsequently, it provides an overview of RRPT policies in EU Member States and discusses the political economy of property tax reforms. Finally, potential RRPT reforms to reduce inequality and support environmental goals are explored. An RRPT with a progressive rate schedule and a regularly updated tax base factoring in the energy performance of the building is able to support growth, reduce income inequality and contribute to a sustainable environment.
    JEL: D1 D3 D31 H2 H21 H22 H22 H24
    Date: 2022–01
  5. By: Enrico Rubolino
    Abstract: This paper studies the labor market effects of a large employer-borne payroll tax cut for unemployed women, introduced in Italy since 2013. I combine social secu- rity data with several empirical approaches, leveraging the time-limited applica- tion of the tax scheme and discontinuities in eligibility criteria across municipali- ties, cohorts, and occupations. I find that the payroll tax cut generates long-lasting growth in female employment, reduces the time spent on welfare, and spurs busi- ness growth, without crowding out male employment. By contrast, the tax cut does not raise net wages, suggesting that tax incidence is mostly on firms. A cost- benefit analysis implies that the net cost of the policy is nearly half of the budgetary cost. These findings suggest that employer-borne payroll tax cuts are an efficient strategy to raise demand for female labor and tackle the gender employment gap, but they are not sufficient for reducing the gender pay gap.
    Keywords: gender gap, female employment, payroll tax, tax incidence
    JEL: H22 J21 J31
    Date: 2022–01
  6. By: Mr. John D Brondolo; Annette Chooi; Trevor Schloss; Anthony Siouclis
    Abstract: All tax administrations seek to maximize the overall level of compliance with tax laws. Compliance improvement plans (CIPs) are a valuable tool for increasing taxpayers’ compliance and boosting tax revenue. This note is intended to help tax administrations develop a CIP, by providing guidance on the following issues: (1) how to identify and rate compliance risks; (2) how to treat risks to achieve the best possible outcome; and (3) how to measure the impacts that treatments have had on compliance outcomes.
    Keywords: Taxes, tax compliance, revenue, revenue administration, risk management
    Date: 2022–03–18
  7. By: Michelle Harding; Dominique Paturot; Hannah Simon
    Abstract: The share of part-time employment in total employment has risen in most OECD countries over the past decades. While this is often associated with increased female labour force participation and the desire of many workers to achieve an improved work-life balance, there has been a significant decline in the average earnings of part-time workers relative to full-time workers, as well as an increase in involuntary part-time employment in a number of countries. This paper presents a summary of the taxation of part-time work in OECD countries. It includes new calculations of the effective tax rates on part-time work including those for male and female part-time workers and for different household types. These indicators provide an evidence base for policymakers looking to understand the impact of the tax system on the choice of employment form. The analysis shows that average tax rates for part-time workers are lower than those applied to full-time workers in almost all OECD countries, reducing post-tax gender wage gaps, although marginal tax rates are often higher for part-time workers. These differences between the taxation of part-time and full-time workers are largely due to differences in earnings levels, and therefore to the progressivity of countries’ tax systems, rather than to differences in the tax treatment applied to part-time workers relative to full-time workers.
    Date: 2022–03–14
  8. By: Antonio Afonso (Universidade de Lisboa); Jose Alves (Universidade de Lisboa); Joao Tovar Jalles (Universidade de Lisboa)
    Abstract: We assess the specific need (or its absence) of a country to implement a fiscal consolidation programme by focusing specifically on their degree of success, notably in terms of fiscal sustainability. The “need†to consolidate is based on having a primary balance above or below the debt-stabilizing primary balance (provided by the IMF’s Debt Sustainability Analysis) for each country. We then link the need for and the actual (historical) existence of fiscal adjustments to their sustainability impact. Looking at a large sample of developed and developing economics over the period 1980-2018, we find that, on average, there is a higher need of consolidations in advanced economies than in developing economies. In addition, the implementation of a fiscal consolidation program implies an improvement in the degree of public finances´ sustainability, for both advanced and developing economies. Finally, fiscal sustainability deteriorates when the need to implement a fiscal retrenchment arises.
    Keywords: fiscal consolidations, cyclically-adjusted primary balance, sustainability, panel data, time-varying
    JEL: H
    Date: 2022
  9. By: Congressional Budget Office
    Abstract: The federal government has long provided significant financial support for public transportation. Federal spending accounted for about one-sixth of the $79 billion in public spending on transit in 2019. During the coronavirus pandemic, lawmakers allocated nearly $70 billion in onetime supplemental funding. Lawmakers also passed the Infrastructure Investment and Jobs Act, which increased the federal government’s annual funding for public transit from $14 billion to $18 billion per year through 2026 and provided funding for new surface transportation programs.
    JEL: H54 R42 R48
    Date: 2022–03–22

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