nep-pbe New Economics Papers
on Public Economics
Issue of 2022‒09‒19
eight papers chosen by
Thomas Andrén

  1. How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers By Lompo, Miaba Louise; Ouoba, Marie Madeleine
  2. Taxing Moral Agents By Esteban Muñoz Sobrado
  3. Income Taxes, Gross Hourly Wages, and the Anatomy of Behavioral Responses: Evidence from a Danish tax reform By SUMIYA Kazuhiko; Jesper BAGGER
  4. Labor Supply Responsiveness to Tax Reforms By Hans Schytte Sigaard
  5. Corporate Political Spending and State Tax Policy: Evidence from Citizens United By Cailin R. Slattery; Alisa Tazhitdinova; Sarah Robinson
  6. Income taxation and equity: new dominance criteria with a microsimulation application By Brunori, Paolo; Palmisano, Flaviana; Peragine, Vito
  7. Tax Salience and Attention Variation: Evidence from a Natural Experiment By Shinri Ishida; Yoshiyuki Nakazono
  8. Estimating the Repercussions from China’s Export VAT Rebate Policy By Julien Gourdon; Laura Hering; Stéphanie Monjon; Sandra Poncet

  1. By: Lompo, Miaba Louise; Ouoba, Marie Madeleine
    Abstract: Understanding tax evasion and tax avoidance mecanism is of critical importance in both developed and developing countries. This paper shed light on five main strategies used by corporation and wealthy taxpayers to avoid taxes including tax heavens, underground economy, aggressive tax optimization, parallel financial markets and cryptocurrencies. We also propose several actions to deal with tax non-compliance across the globe including prevention, peer reporting, active monitoring of compliance indicators and international cooperation. Theses actions might be combined to achieve optimal results in reducing the iompact of tax evasion and tax avoidance.
    Keywords: tax evasion, tax avoidance, tax compliance
    JEL: M48
    Date: 2022
  2. By: Esteban Muñoz Sobrado
    Abstract: Experimental and empirical findings suggest that non-pecuniary motivations play a significant role as determinants of taxpayers’ decision to comply with the tax authority and shape their perceptions and assessment of the tax code. By contrast, the canonical optimal income taxation model focuses on material sanctions as the primary motive for compliance. In this paper, I show how taxpayers equipped with evolutionary Kantian preferences can account for both these non-pecuniary and material motivations. I build a general model of income taxation in the presence of a public good, which agents value morally, and solve for the optimal linear and non-linear taxation problems.
    JEL: H21 H41 D91
    Date: 2022
  3. By: SUMIYA Kazuhiko; Jesper BAGGER
    Abstract: This paper provides quasi-experimental evidence on the effects of income taxes on gross hourly wages by utilizing administrative data and a tax reform in Denmark. The reform introduced joint taxation to a middle tax bracket, bringing large changes to the tax system facing married couples. Using variation in spousal income for identification, we present non-parametric graphical evidence based on a difference-in-differences design among working married males. First, we find heterogeneous effects across income levels. For low-income workers, taxes have negative and dynamic effects on wages. Their elasticity of wages (with respect to net-of-marginal-tax rates) is close to one. For higher-income workers, the effects are small and static, with an elasticity of approximately 0.2. Second, wages respond to taxes through human capital accumulation and job changes. Finally, with smaller magnitudes than wages, daily hours worked also respond negatively to taxes, which contrasts with the prediction from a standard labor supply-and-demand model.
    Date: 2022–08
  4. By: Hans Schytte Sigaard (Department of Economics and Business Economics, Aarhus University)
    Abstract: Labor supply responses constitute real responses to taxation and are central for policy analysis. This paper estimates the elasticity of labor supply at the intensive margin by applying conventional estimation strategies from the elasticity of taxable income (ETI) literature to administrative register data on performed hours of work. The elasticity is estimated to be 0.08, significant, and can be attributed to individuals changing main and secondary employment, a general increase in contract hours, and a reduction in paid absence. By also estimating ETI, which captures all responses to taxation, I show that a large part of total responses can be attributed to individuals adjusting work hours, capturing inherent labor responses, and I thereby provide a link between the labor and public finance literatures. These findings suggest that contextual factors such as labor market fluidity and flexibility are important to facilitate real responses to taxation and that labor supply responses are core underlying drivers of total responses to taxation.
    Keywords: Elasticity of labor supply, marginal tax rates, tax reforms, behavioral responses, public economics
    JEL: H21 H24 H30 J22 J24 J62
    Date: 2022–08–31
  5. By: Cailin R. Slattery; Alisa Tazhitdinova; Sarah Robinson
    Abstract: To what extent is U.S. state tax policy affected by corporate political contributions? The 2010 Supreme Court Citizens United v. Federal Election Commission ruling provides an exogenous shock to corporate campaign spending, allowing corporations to spend on elections in 23 states which previously had spending bans. Ten years after the ruling and for a wide range of outcomes, we are not able to identify economically or statistically significant effects of corporate independent expenditures on state tax policy, including tax rates, discretionary tax breaks, and tax revenues.
    JEL: D72 H20 H71
    Date: 2022–08
  6. By: Brunori, Paolo; Palmisano, Flaviana; Peragine, Vito
    Abstract: This paper addresses the problem of the normative evaluation of income tax systems and income tax reforms. While most of the existing criteria, framed in the utilitarian tradition, are uniquely based on information about individual incomes, this paper, building upon the opportunity egalitarian theory, proposes new equity criteria which take into account also the socio-economic characteristics of individuals. Suitable dominance conditions that can be used to rank alternative tax systems are derived by means of an axiomatic approach. Moreover, the theoretical results are used to assess the redistributive effects of an hypothetical tax reform in Romania through a microsimulation analysis.
    Keywords: income inequality; inequality of opportunity; tax reforms; microsimulation; progressivity; horizontal equity; Springer deal
    JEL: J1 E6
    Date: 2022–08–10
  7. By: Shinri Ishida; Yoshiyuki Nakazono
    Abstract: We examine the salient effects of posting tax-inclusive price tags on demand. We discover attention variation among consumers with only less-educated consumers underreacting to the not-fully-salient tax display. We also find that a change in price tag displays to tax-exclusive prices induces consumers to visit such stores more often than before. More than half of the increase in demand in the stores using the tax-exclusive price tags is accounted for by changing regular stores, which implies that the less salient tax price display influences store patronage. However, our results suggest that the salient effect is a short-lived, not permanent, phenomenon.
    Date: 2022–08
  8. By: Julien Gourdon (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne, Université de Clermont-Ferrand); Laura Hering (Erasmus University Rotterdam); Stéphanie Monjon (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres); Sandra Poncet (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - 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, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - 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)
    Abstract: Our study shows that China's export value-added tax (VAT) rebate system is a major industrial policy that affects its exports. We use export data at the HS6 product level for a panel of 329 Chinese cities over the 2003-2012 period to assess how changes in the export VAT tax have affected China's export performance. We consider different trade margins in terms of volumes, prices, and the number of countries served. To counter endogeneity, we exploit variations in the expected impact of the export VAT rebates by trade regime, which come from an eligibility rule disqualifying certain export flows from the rebates. Our results suggest that a 1 percent decline in the export VAT tax leads to a 7.2 percent relative increase in eligible export values at the city level. This effect is due to an adjustment of quantities and the number of foreign markets served while the average unit values of exports remain unchanged.
    Keywords: China,Export performance,Export tax,Policy evaluation,Trade elasticity,VAT system
    Date: 2022–01

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