nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒01‒02
eleven papers chosen by
Thomas Andrén

  1. Assessment of the impact of regional norms of tax payments to local budgets on the taxable base By Filippova Irina; Deryugin Alexander; Arlashkin Igor
  2. Revenue losses from corporate tax avoidance: estimations from the UNU-WIDER Government Revenue Dataset By Alessandro Chiari
  3. Saving at tax time: Do additional retroactive savings opportunities increase retirement savings? By Blaufus, Kay; Milde, Michael; Schaefer, Marcel
  4. Pay for tax certainty? Advance tax rulings for risky investment under multi-dimensional tax uncertainty By Chen, An; Hieber, Peter; Sureth, Caren
  5. Significant costs, limited benefits: A global minimum tax in Germany By Gaul, Johannes; Klein, Daniel; Müller, Jessica M.; Pfrang, Alina; Schulz, Inga; Spengel, Christoph; Weck, Stefan; Wickel, Sophia; Winter, Sarah
  6. Welfare effects of R&D support policies By Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto
  7. New Estimate of the Elasticity of Marginal Utility of Consumption for Europe: Implications for the Social Discount Rate By Milan Scasny; Matej Opatrny
  8. How to Evaluate Tax Expenditures By Ms. Dora Benedek; Sebastian Beer; Jan Loeprick; Brian Erard
  9. Is international tax competition only about taxes? A market-based perspective By Céline Azémar; Rodolphe Desbordes; Ian Wooton
  10. Tax provisioning by extractive industry multinational subsidiaries By Khanindra Ch. Das
  11. A Tale of Government Spending Efficiency and Trust in the State By António Afonso; João Tovar Jalles; Ana Venâncio

  1. By: Filippova Irina (Russian Presidential Academy of National Economy and Public Administration); Deryugin Alexander (Russian Presidential Academy of National Economy and Public Administration); Arlashkin Igor (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The paper considers the impact of regional tax transfers to municipal budgets on the taxable base on a sample of 72 Russian regions for the period 2011–2018. The results of the assessment show that the transfer of the tax applied under the simplified taxation system and personal income tax has a positive effect in poor regions. The transfer of corporate income tax has a positive effect in rich regions. No significant results were obtained in regard to corporate property tax.
    Keywords: taxes policy, comparative analysis
    Date: 2021–01
  2. By: Alessandro Chiari (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Corporate profit shifting to tax havens negatively impacts corporate tax revenue, particularly in low-income countries. Two studies published in 2016 and 2018 have proven this correlation using data from 2013. In this paper, I use the most recent version of the UNU-WIDER Government Revenue Dataset (GRD) to estimate government revenue losses in 2019 and to observe possible changes associated with the release of the new dataset. My estimations indicate that global tax revenue losses in 2019 are around USD 480 billion, compared to USD 500 billion in 2013. In terms of GDP percentage, my estimations confirm the presence of a higher share of losses in low-income, and more generally, in non-OECD countries, and they show a higher intensity of tax avoidance practices in those countries. The results also suggest that the total level of tax revenue losses has plateaued, with no increase in losses occurring since 2013.
    Keywords: international taxation; corporate income tax; tax avoidance; tax havens; base erosion; profit shifting; income inequality; developing countries
    JEL: F21 F23 H25
    Date: 2022–06
  3. By: Blaufus, Kay; Milde, Michael; Schaefer, Marcel
    Abstract: Using a series of experiments, we examine whether the additional opportunity to save retroactively for retirement at the time of tax filing increases overall retirement savings. Our findings show that introducing the additional savings opportunity at tax time increases the total savings rate by almost 5 percentage points. This positive effect holds regardless of whether retirement savings are taxed immediately (back-loaded pension plans) or deferred (front-loaded pension plans) or whether subjects expect back taxes or a tax refund. We show that the effect is not due to higher tax salience at tax time but that the additional offer to save nudges impulsive savings behavior. Policymakers may thus consider the introduction of an additional savings opportunity at tax time as a policy tool to encourage retirement savings. In addition, policymakers should consider the advantage of immediate over deferred taxation in increasing retirement savings. We show that the savings gap between immediate and deferred taxation found in previous studies can expand further if savings are additionally allowed at tax filing.
    Keywords: Retirement savings,tax incentives,impulsive savings,tax salience,nudging,deferred taxa-tion
    JEL: D9 D14 D15 G51 H31
    Date: 2022
  4. By: Chen, An; Hieber, Peter; Sureth, Caren
    Abstract: In this study, we use advance tax rulings (ATR) to investigate the impact of fee-based tax certainty on risky investment decisions of a firm under both cash flow and tax uncertainty. We model and analyze the multi-dimensional nature of tax uncertainty from tax reforms and tax audits in expected tax rates, tax bases, and in conjunction with loss offset restrictions. A tax au-thority can provide tax certainty by offering ATRs and charging an ATR fee. The fee imposes costs on firms. We determine the critical ATR fee range in which the ATR is acceptable for both the firm and tax authority. Gener-ally, we find the ATR allows the firm to take on riskier investments. If the ATR is employed in an environment with a generous tax loss offset policy, the ATR's inducement effect on risky investments is even strengthened. We identify settings in which the tax authority is willing to charge zero or even negative ATR fees. Negative fees can be interpreted as enhanced services to taxpayers that reduce taxpayers' compliance costs. Surprisingly, we find that an ATR is particularly effective for firms with low risk aversion. Our findings suggest that ATRs can effectively fight tax uncertainty and stimulate investment. However, their effectiveness crucially depends on tax system features such as loss offset restrictions and the ATR fee.
    Keywords: advance tax ruling,cash flow uncertainty,loss offset provisions,optimal fee,optimal investment,tax uncertainty
    JEL: G11 H25 M41 M42 M48
    Date: 2022
  5. By: Gaul, Johannes; Klein, Daniel; Müller, Jessica M.; Pfrang, Alina; Schulz, Inga; Spengel, Christoph; Weck, Stefan; Wickel, Sophia; Winter, Sarah
    Abstract: In order to curb tax-motivated profit shifting and limit international tax competition, 137 signatory coun- tries to the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) agreed in 2021 to introduce a global minimum tax on multinational corporations. At first glance, the introduction of the minimum tax would effectively limit international tax competition to a rate of 15%. However, this would require the global implementation of the scheme, as well as the harmonization of tax-base calculation methods. Ful- filment of these conditions is unrealistic, however, due to non-cooperative countries as well as current political tensions. In addition, high administrative and compliance costs would result. Our estimates show that the additional tax declaration costs for affected German corporations would amount to around 319 million euros for implementation and to around 100 million euros annually for ongoing compliance. In September 2022, the German government announced that, if necessary, Germany will unilaterally intro- duce the global minimum tax scheme. This is not advisable, however, since a unilateral move would not reduce tax-motivated profit shifting or international tax competition. At the same time, it would lead to high one-sided costs and a reduction in Germany's attractiveness as a location for business and invest- ment, while also generating little in the way of new revenues.
    Date: 2022
  6. By: Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto
    Abstract: We construct a model of innovation incorporating R&D externalities, R&D participation, financial market imperfections, and application and allocation of R&D subsidies, estimate it using Finnish R&D project level data and conduct a welfare analysis. The intensive, not the extensive R&D margin is important. Financial market imperfections are small. Tax credits and subsidies do not reach first best R&D but increase R&D 29-47% compared to laissez-faire. Welfare effects are small: Tax credits increase welfare 1%; subsidies reduce welfare once application costs are taken into accout. In terms of fiscal cost, tax credits are 90% more expensive than R&D subsidies.
    Keywords: R&D subsidies,R&D tax credits,extensive and intensive margin,financial market imperfections,welfare,counterfactual,economic growth
    Date: 2022
  7. By: Milan Scasny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Matej Opatrny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We provide the first estimate of the elasticity of marginal utility of consumption, µ, for Europe and for thirty individual European countries, using the income-tax individual-level data. Specifically, we rely on the absolute equal-sacrifice approach and CRRA utility function to elicit the revealed preferences of income tax payers on their acceptance of the tax schedule. Our central estimate of µ equals to 1.42. With few exceptional cases, µ´s for European countries exceed unity, ranging between 1.2 and 1.90. We further discuss the implications of our estimate of µ for the social discount rate and Social Cost of Carbon. We conclude that the social discount rate might be slightly higher than traditionally assumed, implying lower magnitude of Social Cost of Carbon, at least for Europe.
    Keywords: elasticity of marginal utility of consumption; equal-sacrifice approach; income tax schedules; marginal tax rate; social discount rate
    JEL: D60 D61 H24 R13
    Date: 2022–12
  8. By: Ms. Dora Benedek; Sebastian Beer; Jan Loeprick; Brian Erard
    Abstract: Governments use tax expenditures (TEs) to provide financial support or benefits to taxpayers. The budgetary impact of TEs can be similar to that of direct outlays: after the support is provided, less money is available to fund other government priorities. Systematic evaluations are needed to guide informed decision-mak¬ing and to avoid a situation where the narrative on the benefits of TEs is primarily driven by profiting stakeholders. By TE “evaluation,” this note refers to a process that seeks to systematically inform policymak¬ers on the desirability of introducing or maintaining specific tax benefits by gathering and analyzing avail¬able quantitative and qualitative information on their effects. Evaluation processes can be tailored to different levels of data availability and analytical capacity. An evaluation should focus on the policy objective of a TE and whether it effectively and efficiently contrib¬utes to that policy objective. Although important lessons can be learned from coun¬try practices in implementing increasingly ambitious evaluation processes, there is no single best-practice approach to replicate.
    Keywords: tax expenditures; cost-benefit assessment; public policy evaluation; sample evaluation; publication order; publication service; title page; post evaluation; Tax incentives; Compliance costs; Value-added tax; Global; East Asia
    Date: 2022–11–30
  9. By: Céline Azémar (Adam Smith Business School - University of Glasgow, ESC [Rennes] - ESC Rennes School of Business); Rodolphe Desbordes (SKEMA Business School); Ian Wooton (University of Strathclyde [Glasgow])
    Abstract: This paper revisits tax competition among governments for foreign direct investment (FDI) by considering the role played by the economic dynamism of competitors on the setting of corporate tax rates (CTRs). Using a database with worldwide coverage over the period 1995–2014, we find that strong growth performance of neighbouring countries is associated with a lower CTR, especially in developed countries. This spatial effect is particularly manifest if competing countries are large and open to capital flows. These results appear to hold in most regions of the world and suggest that governments perceive foreign economic dynamism as a threat, leading them to reduce their CTRs to maintain their FDI attractiveness.
    Keywords: Tax competition,Country size,Foreign direct investment,Developing countries,Free-trade zones,Spatial lag
    Date: 2020–12
  10. By: Khanindra Ch. Das
    Abstract: Extractive industries are spread across mining of metal and minerals, oil and gas, among others. Multinationals in these sectors are confronted with different challenges ranging from corruption, political risk, economic uncertainty, sunk costs, and the long-gestation periods to execute projects. As a result, tax payment behaviour of subsidiaries in the extractive sector could be dependent not only on these factors, but also on the life cycle of the subsidiary, profitability, and holding structure.
    Keywords: Extractive industries, Tax, policy uncertainty, Corruption, Political stability, Economic policy
    Date: 2022
  11. By: António Afonso; João Tovar Jalles; Ana Venâncio
    Abstract: This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public sector efficiency on citizens trust on national governments. The sample covers 36 OECD countries between 2007 and 2019. We find that the more efficient countries in terms of government spending are Australia, Chile, Ireland, New Zealand, South Korea, Switzerland. Secondly, our main finding is that better public sector spending efficiency is positively associated with citizens’ higher trust in governments. In general, political economy variables and the existence of fiscal rules do not seem to significantly affect our measure of trust. Results were held using alternative proxies for public sector efficiency, specifications with different control variables and instrumental variables approaches.
    Keywords: government spending efficiency, DEA, panel data analysis, confidence effects, ideology, fiscal rules
    JEL: C14 C23 E44 G15 H11 H50
    Date: 2022

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