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on Public Economics |
| By: | MAIER ESSINGER Sofia (European Commission - JRC); RICCI Mattia (European Commission - JRC) |
| Abstract: | During the 2010-2019 decade, consumption taxes have risen in the vast majority of the EU Member States as a result of austerity measures, tax shifts as well as taxing transport and housing-related energy consumption. The redistributive impact of these policy changes remains mostly unexplored. In this paper, we provide new empirical evidence on the redistributive effect of changes in VAT and excises over this period, along with other developments in the broader tax-benefit system including tax shift reforms. Our results indicate that the consumption tax systems in the EU have become more unequalizing in most countries as a result of an increase in the tax burden and of its regressivity. While the taxation of transport is the component that has increased the most, the highest inequality impact was driven by the taxation of housing-related energy consumption. Only in a few countries these policy changes were accompanied by an increase in social transfers sufficient to compensate the poorest households. |
| Keywords: | Consumption taxation, Tax shift, Austerity, Inequality, Microsimulation |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202210&r=pbe |
| By: | Minoru Watanabe (Hokusei Gakuen University) |
| Abstract: | The current study aimed to develop a standard overlapping generations model incorporating involuntary unemployment caused by the union wage setting and fertility choice within an endogenous growth framework. Our study assumes that capital income tax finances in work benefits, which is the income transfer conditioned on work. The results indicate that increasing capital income tax promotes employment and hence promotes economic growth. Further, we demonstrate that a rise in capital income tax improves fertility. |
| Keywords: | Capital income tax, Involuntary unemployment, Fertility |
| JEL: | H55 J13 J51 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:2302&r=pbe |
| By: | Mr. Shafik Hebous; Nate Vernon; Dinar Prihardini |
| Abstract: | This paper discusses the design of excess profits taxes (EPTs) that gained renewed interest following the COVID-19 outbreak and the recent surge in energy prices. EPTs can be designed as an efficient tax only falling on economic rent, like an allowance for corporate capital, and drawing some parallels with current proposals for reforming multinationals’ taxation. EPTs can be permanent or temporary as an add-on to the corporate income tax to support revenue during an adverse shock episode. The latter reflects experiences with EPTs during and after the World Wars. Different from that era, though, profit shifting is now a challenge. Estimation using firm-level data suggest that, at present, locations of excess profit across countries are consistent with profit shifting practices by multinationals. Destination-based EPTs can address this concern. Estimates suggest that a 10 percent EPT on the globally consolidated accounts of multinationals (on top of the current corporate income tax), with the EPT base being allocated using sales, raises global revenue by 16 percent of corporate income tax revenues. The analysis suggests that international coordination would be desirable to mitigate the risks of profit shifting and tax competition. Eventually, EPTs could mark an evolution of corporate taxation toward a non-distortionary rent tax. |
| Keywords: | profit shifting; profits tax; com petition; profit tax; excess profits; Corporate income tax; Allowance for corporate equity; Non-wage benefits; Corporate taxes; Global |
| Date: | 2022–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/187&r=pbe |
| By: | Mona Barake (EU Tax - EU Tax Observatory) |
| Abstract: | This paper explores profit shifting behaviour by European banks through a newly available data source. Financial institutions as of 2014 started disclosing their activity on a country-by-country level following the CRDIV EU Directive. The country-by-country reporting (CbCR) requires European banks to file their revenues, profits, number of employees and taxes paid in all countries where they operate including tax haven countries. In this paper, I construct the database for bank CbCR from the banks filings and annual reports. The database includes 51 European banks headquartered in 18 different European countries between 2014 and 2020. I use the database to study profit shifting arising from international tax differences between countries. I find that the banks' profits are sensitive to the tax rate suggesting that banks lower their tax burden through their affiliates. The size of banks seems to have an effect, the larger the bank group, the more it might engage in tax planning. Profit shifting is estimated by using the tax differential methodology. The findings show that profit shifting by the top European banks is around 4-3% percent of the total profits booked abroad. This implies tax revenue losses of up to 3-2%. The introduction of a global minimum tax of 15% would generate between 300 to 2 billion euros depending on the final rules implemented. |
| Keywords: | Profit shifting, Tax planning, Banks, Country-by-country reporting |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03925346&r=pbe |
| By: | David R. Agrawal; Iuliia Shybalkina |
| Abstract: | What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions. |
| Keywords: | sales tax, online shopping, e-commerce, COVID-19, tax revenue |
| JEL: | H25 H71 L81 R51 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10204&r=pbe |
| By: | Di Cosmo, Valeria; Tiezzi, Silvia |
| Abstract: | When judging the distributional impact of a sin tax, what matters is not just how much low income people would pay but how much the tax would benefit or harm them overall. In this paper we assess the consumer welfare impact of a fat tax net of its expected benefits computed as savings from averted internalities. Using data on Italian consumers we estimate a censored Exact Affine Stone Index (EASI) incomplete demand system for food groups and simulate changes in purchases, calorie intake, consumers’ welfare and the monetary value of health benefits after the tax. Our results suggest costs from taxation larger than benefits at all income levels. As a fraction of income, the net impact would be regressively distributed. |
| Keywords: | sin taxes; internality benefits; welfare costs; exact affine stone index demand system; demand elasticities; micronutrients intake |
| JEL: | C3 H22 H23 I3 I39 |
| Date: | 2023–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116214&r=pbe |
| By: | Chiara Bellucci (Ministry of Economy and Finance); Silvia Carta (Ministry of Economy and Finance); Sara De Tollis (Ministry of Economy and Finance); Federica Di Giacomo (Ministry of Economy and Finance); Marco Manzo (Ministry of Economy and Finance); Daniela Bucci (Soluzioni per il Sistema Economico S.p.A. - Sose); Donato Curto (Soluzioni per il Sistema Economico S.p.A. - Sose); Fabrizio De Grandis (Soluzioni per il Sistema Economico S.p.A. - Sose); Francesca Sica (Soluzioni per il Sistema Economico S.p.A. - Sose) |
| Abstract: | The CITSIM-DF is the corporate tax microsimulation model developed by the Department of Finance in order to estimate the heterogeneous impact of changes in fiscal regulation on average effective tax rates, both in terms of financial and distributional effects. One of the main innovations of the model is the inclusion of forecasts on future economic trends into the simulations, by projecting forward the main fiscal and financial variables. Currently projections are based, at macro level, on national accounts and official projections reflected in the documents of economy and finance. In the next future, the model will be further developed in a now-casting perspective, incorporating in the projections, at micro level, the most recent administrative data available. The model proposes also a new methodology for disentangling investments and historical cost broken by type of asset (buildings, machinery and equipment). CITSIM-DF is based on a unique dataset that integrates administrative data derived from tax returns and financial statements for corporations. |
| Keywords: | Tax treatment of losses; Allowance for corporate equity; Corporate taxation; Microsimulation |
| JEL: | C63 H25 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:ahg:wpaper:wp2023-17&r=pbe |
| By: | Rodrigo Oliveira; Jesse Lastunen; Pia Rattenhuber; Melissa Samarin; Adnan Abdulaziz Shahir |
| Abstract: | In the wake of the COVID-19 pandemic, several countries enacted tax and social protection measures to help mitigate the economic hardship faced by individuals and households. This experience underscores the need to better understand the impact of such programmes on incomes and poverty during crises, especially in low- and middle-income countries (LMICs) where they are most needed. This paper reviews existing empirical literature on the subject, conducting a scoping review on quantitative studies published between 2000 and 2022. |
| Keywords: | Social protection, Taxation, Crisis, Shocks, Developing countries |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-6&r=pbe |
| By: | Erwin Ooghe; Erik Schokkaert; Hannes Serruys |
| Abstract: | We characterize a measure of social welfare for linear production economies in which individuals differ in productive skills and preferences. The key feature of our measure is that it aggregates fairness gaps, defined as the difference between the money-metric utility that the individual currently obtains and the money-metric utility that the individual should obtain in a fair society. Social welfare depends on two normative parameters: society’s aversion to unfairness and the degree to which society wants to compensate individuals for productivity differences. The latter parameter makes it possible to accommodate a whole range of ethical perspectives, from libertarianism to resource-egalitarianism. As an illustration, we use our social welfare measure to evaluate four hypothetical earnings tax reforms for Belgian singles. The degree of compensation for productivity differences turns out to be the most important normative choice for the overall evaluation, while allowing for involuntary unemployment is the most important empirical choice. |
| Keywords: | fairness, money-metric utility, excess burden, unfair inequality, earnings tax reforms, involuntary unemployment |
| JEL: | D30 D60 D70 H20 I30 J20 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10242&r=pbe |
| By: | Karademir, Sencer (University of Calgary); Laliberté, Jean-William (University of Calgary); Staubli, Stefan (University of Calgary) |
| Abstract: | The disproportionate impact of children on women's earnings constitutes the primary factor contributing to persistent gender inequality in many countries. This paper examines the multigenerational impact of children and whether the public provision of formal childcare lessens the earnings and employment impacts of children. Our analyses notably incorporate the role of grandparents as informal providers of childcare. We find that the arrival of a firstborn reduces the employment and earnings of mothers and grandmothers, suggesting that the life-cycle impact of children on women is larger than previously thought. Studying the implementation of a universal childcare program in the province of Quebec, we find that formal childcare increases the employment rates of mothers, as well as that of grandmothers to a lesser extent. Examining heterogeneity of the program's impact across census divisions, we find a negative correlation between the magnitude of the positive effects on mothers' employment and the pre-policy supply of informal childcare by grandmothers. Our findings together indicate that (1) analyses of social policies should consider broader family units and (2) the impact of childcare policies on mothers depends on pre-existing care arrangements, particularly the amount of care provided by grandparents. |
| Keywords: | childcare policies, labour supply, grandparents, parents, event study, policy reform |
| JEL: | H31 H42 J08 J13 J16 J18 J22 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15894&r=pbe |
| By: | Rasmus Wiese; João Tovar Jalles; Jakob de Haan |
| Abstract: | This paper examines the impact of labour market and product market reforms on income inequality for 25 OECD countries, using the local projections approach and updates of the reform indicators put together by Duval et al. (2018) until 2020. Our results suggest that both types of (endogenized) reforms cause more income inequality. Consistent with this finding is that counter-reforms lead to less income inequality. However, the inequality-raising effects of reforms occur especially in countries that have below median levels of social spending; in countries where social spending is above the sample median, the effect of reform is mostly statistically insignificant. |
| Keywords: | structural reforms, income distribution, local projections, nonlinearities |
| JEL: | D31 J21 H30 L43 L51 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10214&r=pbe |
| By: | Panagiotis Nanos (Department of Economics, University of Sheffield, UK) |
| Abstract: | In this paper, I carry out a welfare analysis of the minimum wage in the framework of a Diamond-Mortensen-Pissarides model with stochastic job matching. I explore the role of the minimum wage in a labour market with trading externalities and present the necessary and sufficient condition for a minimum wage hike to be efficiency-enhancing. In this context, I characterise minimum wage spillover effects and demonstrate that there is a direct link between the welfare effects and spillover effects of a minimum wage. This theoretical finding suggests that the welfare impact of minimum wage changes can be inferred from the empirical observation of spillover effects on the wage distribution. |
| Keywords: | minimum wage, wage distribution, social welfare, policy evaluation |
| JEL: | J08 J64 H21 H23 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2023004&r=pbe |