nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒06‒13
eleven papers chosen by
Thomas Andrén

  1. Taxes, Risk Taking, and Financial Stability By Kogler, Michael
  2. Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies By Baptiste Souillard
  3. Automatic Tax Filing: Simulating a Pre-Populated Form 1040 By Lucas Goodman; Katherine Lim; Bruce Sacerdote; Andrew Whitten
  4. Income Tax data and Facets of transparency. By Rao, R. Kavita
  5. A basic income for France: Ideas for a debate By Richiardi, Matteo
  6. The Value of Unemployment Insurance: Liquidity vs. Insurance Value By Victor Hernandez Martinez; Kaixin Liu
  7. Tax Robbery Incorporated: The transnational legal infrastructures of tax arbitrage By Liste, Philip
  8. Female labour supply and informal employment in Ecuador By H. Xavier Jara; Pia Rattenhuber
  9. A european equivalence scale for public in-kind transfers By Rolf Aaberge; Audun Langørgen; Petter Y. Lindgren
  10. The quality of public finances By Thöne, Michael
  11. Fiscal decentralization and income (re)distribution in OECD countries' regions By Pietrovito, Filomena; Pozzolo, Alberto Franco; Resce, Giuliano; Scialà , Antonio

  1. By: Kogler, Michael
    Abstract: After the global financial crisis, the use of taxes to enhance financial stability received new attention. This paper compares two ways of taxing bank leverage, namely, an allowance for corporate equity (ACE), which addresses the debt bias in corporate taxation, and a Pigovian tax on bank debt (bank levy). We emphasize financial stability gains driven by lower bank asset risk and develop a principal-agent model, in which risk taking depends on the bank's capital structure and, by extension, on the tax treatment of debt and equity because of moral hazard. We find that (i) the ACE unambiguously reduces risk taking, (ii) bank levies reduce risk taking if they are independent of bank performance but may be counterproductive otherwise, (iii) high corporate tax rates render the bank levies less effective, and (iv) taxes are especially effective if capital requirements are low.
    Keywords: Pigovian taxes, corporate tax reform, bank risk taking, financial stability
    JEL: G21 G28 H25
    Date: 2022–05
  2. By: Baptiste Souillard
    Abstract: Corporate tax avoidance has regularly been accused of aggravating income inequalities. Yet, systematic evidence on this matter is still lacking. To fill this gap, the present paper explores the effect of profit shifting on employee pay among S&P 1500 companies. The study shows that its effect indeed varies across occupations. Chief executive officers and chief financial officers receive higher compensations when their firm starts operating in tax havens. Non-executive employees, if anything, see their wages fall in the meantime. Furthermore, the inequality-deepening impact of firm entry into tax havens is driven by companies that reward executives on an after-tax basis and more pronounced in intangible-intensive companies. These new findings enrich our understanding of the distributional consequences of profit shifting. They also cast light on the evolution of income inequalities, public opinion about globalization, and ongoing debates on international tax reforms.
    Keywords: employee pay, multinational enterprises, profit shifting, tax havens, income inequalities
    JEL: F16 H26 J30 M12
    Date: 2022
  3. By: Lucas Goodman; Katherine Lim; Bruce Sacerdote; Andrew Whitten
    Abstract: Each year Americans spend over two billion hours and $30 billion preparing individual tax returns, and these filing costs are regressive. To lower and redistribute the filing burden, some commentators have proposed having the IRS pre-populate tax returns for individuals. We evaluate this hypothetical policy using a large, nationally representative sample of returns filed for the tax year 2019. Our baseline results indicate that between 62 and 73 million returns (41 to 48 percent of all returns) could be accurately pre-populated using only current-year information returns and the prior-year return. Accuracy rates decline with income and are higher for taxpayers who have fewer dependents or are unmarried. We also examine 2019 non-filers, finding that pre-populated returns tentatively indicate $9.0 billion in refunds due to 12 million (22 percent) of them.
    JEL: H0 H2 H24 I3
    Date: 2022–04
  4. By: Rao, R. Kavita (National Institute of Public Finance and Policy)
    Date: 2022–05
  5. By: Richiardi, Matteo
    Abstract: The purpose of this note is to discuss the distributional effects of some a priori identified UBI schemes, as an illustration of the different trade-offs involved, and to foster the debate around UBI in France. All these schemes share the feature of retaining some limited form of targeting - in particular discriminating access to the scheme and generosity of the benefit by age. We find that the option funded only by the elimination of selected targeted benefits is regressive on average, and that only by funding the UBI with a significant increase in general taxation, we are able to obtain a reduction in poverty rates. We also consider a more limited basic income scheme targeted to young adults between the age of 20 and the age of 24 (included) only, funded by an increase in all marginal tax rates of 3 percentage points (with no changes to the personal tax allowance). No benefits are eliminated in this case. Results point to drastic improvements for the targeted group and their families, while the costs remain manageable as they are shared by the whole population of taxpayers.
    Date: 2022
  6. By: Victor Hernandez Martinez; Kaixin Liu
    Abstract: This paper argues that the value of unemployment insurance (UI) can be decomposed into a liquidity component and an insurance component. While the liquidity component captures the value of relieving the cost to access liquidity during unemployment, the insurance component captures the value of protecting the worker against a potential permanent future income loss. We develop a novel sufficient statistics method to identify each component that requires only the labor supply responses to changes in the potential duration of UI and severance payment and implement it using Spanish administrative data. We find that the liquidity component represents half of the value of UI, while the insurance component captures the remaining half. However, the relevance of each component is highly heterogeneous across different groups of workers. Poorer and wealthier workers are both similarly liquidity-constrained, but poorer workers place a higher value on UI because the insurance component is significantly more important for them. On the other hand, wealthier workers and workers with more cash-on-hand value additional UI equally, but the wealthier value its liquidity, while those with more liquidity care about its insurance value. Finally, from a welfare perspective, we show that extending the potential duration of Spain’s UI would increase welfare. However, in our counterfactual case where UI is complemented with the provision of liquidity, the optimal potential duration of Spain's UI should be lower than its current level.
    Keywords: Unemployment Insurance; Liquidity Constraints; Consumption Smoothing
    JEL: H20 J64 J65
    Date: 2022–05–18
  7. By: Liste, Philip
    Abstract: In the media, the so-called cum/ex trades were addressed as the biggest tax robbery in history. In a few years, the financial trading scheme caused an estimated damage to European state treasuries of ca. 50 billion euros. Through highly complex transactions, a network of equity traders, banks, super-rich investors, and lawyers generated returns of capital income tax that had never been paid before. In 2019, two involved British traders were put on trial in Bonn, Germany. Due to their cooperative behaviour, they received only mild sentences. Yet, this first cum/ex lawsuit has been a critical starting point for a wave of trials to follow. Observing the trial, the paper focuses on the role of law in the cum/ex industry. First, law is addressed not as constraining but enabling tax-driven equity - as an infrastructure that makes dark finance possible. Second, this legal infrastructure is not fixed but depends on an ongoing legal practice. And third, the infrastructure used for dark finance is not limited to domestic law. Rather, the relevant trading structures involve a series of transnational transactions, which are subject to various regulatory regimes, domestic and international, as well as public and private.
    Keywords: Cum/ex,global tax governance,legal infrastructure,transnational law,white-collar crime,finance,court ethnography,practice,expertise,law and society studies
    Date: 2022
  8. By: H. Xavier Jara; Pia Rattenhuber
    Abstract: Low- and middle-income countries face a trade-off between raising tax revenue to strengthen social protection and creating incentives for the population to enter formal employment. However, empirical evidence on labour supply elasticities in the presence of informal employment remains scarce. This paper analyses female labour supply behaviour and the choice between formal and informal employment in Ecuador, a middle-income country characterized by persistent levels of informal employment particularly among women.
    Keywords: Labour supply, Informal work, Tax-benefit policy, Ecuador, female labour supply, Informality
    Date: 2022
  9. By: Rolf Aaberge; Audun Langørgen; Petter Y. Lindgren (Statistics Norway)
    Abstract: This paper introduces a theory-based equivalence scale for public in-kind transfers, which justifies comparison of distributions of extended income (cash income plus the value of public services) between European countries. We demonstrate the usefulness of the proposed equivalence scale in an empirical analysis of the effects of public health care, long-term care, education and childcare expenditure on estimates of income inequality and poverty for 24 European countries. The empirical results show significant effects of public in-kind transfers on the level of income inequality and poverty for all countries. Over the period 2006–2018, inequality and poverty estimates display rather different trends across European countries.
    Keywords: Income distribution; poverty; equivalence scales; needs adjustment; public services; inkind transfers
    JEL: D30 H40 I30
    Date: 2022–05
  10. By: Thöne, Michael
    Abstract: The concept of the "quality of public finances" (QPF) covers many qualitative and structural issues of fiscal policy. This chapter traces the origins of the concept of QPF to the Lisbon Strategy and the subsequent EPC Working Group on "Quality of Public Finances" (2004-2007). At its core, the QPF focuses on the impact that the composition of public spending has on long-term goals such as economic growth. Growth- and sustainability-enhancing public spending comprises infrastructure investment, human capital investment (education, health, family policy, gender policy) and spending on natural capital and climate protection. Today, QPF indicators can very helpful in national fiscal governance and for the supranational surveillance as in the EU. A future QPF approach for the 2020s should help to prioritize inclusive growth and decoupling economic growth from the use of finite resources. Quality indicators can also help to determine the legit- imate levels of new government debt ("green golden rule").
    Keywords: Quality of public finances (QPF),expenditure composition,growth-enhancing public spending,fiscal governance,decoupling,green golden rule
    JEL: E62 H11 H50 H52 H54 H61
    Date: 2022
  11. By: Pietrovito, Filomena; Pozzolo, Alberto Franco; Resce, Giuliano; Scialà , Antonio
    Abstract: Cross-country income inequality has declined in the last decades, but this trend has been paralleled by an increase in within-countries inequality. At the same time, many governments have implemented fiscal decentralization policies, devolving increasing decision-making powers on fiscal matters to sub-national levels of government. In this paper, we provide empirical evidence on the relationship between fiscal decentralization and intra-regional income redistribution, based on regional level data on inequality and government revenues for 187 regions of 15 OECD countries. Our results show that within region income redistribution is negatively associated with fiscal decentralization, especially when it takes the form of revenue decentralization.
    Keywords: Fiscal Decentralization, Inequality, OECD Regions
    JEL: H2 H7 R5
    Date: 2022–05–30

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