nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒04‒03
thirteen papers chosen by
Thomas Andrén

  1. Has the Time Come for Excess Profit Taxes? By Shafik Hebous
  2. Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities By Mario Mansour; Eric M. Zolt
  3. Tax exile versus legitimate taxation By Jean-Marie Monnier
  4. The surplus-value rate and the structure of the tax system By Ferran Sancho
  5. Investigating Tax Compliance with Mixed-Methods Approach: The Effect of Normative Appeals Among the Firms in Latvia By Saulitis, Andris; Chapkovski, Philipp
  6. Conditioning public pensions on health: effects on capital accumulation and welfare By Giorgio Fabbri; Marie-Louise Leroux; Paolo Melindi-Ghidi; Willem Sas
  7. Republic of Slovenia: Technical Assistance Report-Revenue Administration Gap Analysis Program- Corporate Income Tax Gap By International Monetary Fund
  8. Do National Fiscal Rules Support Numerical Compliance with EU Fiscal Rules? By Cristiana Belu Manescu; Elva Bova; Martijn Hoogeland; Philipp Mohl
  9. How does financial sector development improve tax revenue mobilization for developing countries? By AGUIMA AIME BERNARD LOMPO
  10. On the fiscal behavior of subnational governments. A long-term vision for Argentina By Jorge Puig; Alberto Porto
  11. Financial Commitments of Federal Credit and Insurance Programs, 2012 to 2021 By Congressional Budget Office
  12. The Interdependence of Wealth: Exploring the associations between relational and material wealth in Pemba By Redhead, Daniel Dr.; Maliti, Emmanuel; Andrews, Jeffrey; Borgerhoff Mulder, Monique
  13. The impact of a social program on women bargaining power: The case of AUH in Argentina By Matías Ciaschi; Santiago Garganta

  1. By: Shafik Hebous
    Abstract: Excess profit taxes (EPTs) emerge as an option to contribute to the extra needed revenues, avoiding a general increase in corporate tax rates, while having the prospect to serve as a gateway to converge toward a permanent efficient rent tax in lieu of the corporate income tax. General unilateral (temporary or permanent) EPTs would face the same international pressures from profit shifting and tax competition as the existing corporate income tax, calling for international coordination. A coordinated EPT on multinational enterprises can take the form of a formulary apportionment approach that allocates the EPT base using sales by destination.
    Date: 2023
  2. By: Mario Mansour; Eric M. Zolt
    Abstract: Personal income taxes (PITs) play little or no role in the Middle East and North Africa, often yielding less than 2 percent of GDP in revenue—with the exception of few North African countries. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Top marginal tax rates on labor and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue intake from this source remains low throughout the region (less than 1 percent of GDP on average and concentrated in oil-importing non-fragile states). Social security contributions (SSC) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increase of SSC, have resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT/SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance the revenue and equity objectives against effciency objectives (in particular labor market incentives and infromality). Countries with no PITs will have to weigh whether a consumption tax/SSC system that mimic a flat tax on labor income is sufficient to diversify revenue away from oil and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, who face more political volatility and weaker fiscal institutions, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
    Keywords: Personal income taxes; social security contributions; payroll taxes; fragile and conflict states; Middle East and North Africa; Gulf-Cooperation Council; SSC reform; SSC system; revenue performance; PIT objective; PIT revenue; Personal income tax; Income tax systems; Income; Income and capital gains taxes; Corporate income tax; North Africa; Middle East; East Africa; Global
    Date: 2023–02–17
  3. By: Jean-Marie Monnier (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The anti-tax argument has coalesced in recent years on the issue of tax exile considered as the symptom of tax persecution of the rich. The article aims to show that this approach ignores the nature of the relationship between the State and each individual tax-payer. Tax is not linked to the advantages that each citizen derives from public action nor from the individual appreciation of each to take charge of public financing needs. Secondly it recalls that tax progressivity must make it possible not to tax the subsistence minimum and that in reality, those who are avertaxed are at the bottom of the income range. Finally, there is no tax exile and tax expatriation stems from a desire to free oneself from national rules and take advantage of the competitive game between countries.
    Abstract: L'argumentaire anti-fiscal s'est coagulé ces dernières années autour de la question de l'exil fiscal considéré comme le symptôme d'une persécution fiscale des riches. L'article vise à montrer que cette approche méconnait la nature des relations entre le fisc et le contribuable individuel. Dans un premier temps, il montre qu'il n'y a pas de contrat marchand entre l'Etat et chaque contribuable individuel. L'impôt n'est pas lié aux avantages que retire chaque citoyen de l'action publique ni de l'appréciation individuelle de chacun à prendre en charge les besoins publics de financement. Dans un second temps on rappelle que la progressivité doit permettre de ne pas taxer le minimum de subsistance et que dans la réalité, ceux qui sont surimposés se situent dans le bas de l'éventail des revenus. Finalement, il n'y a pas d'exil fiscal et l'expatriation fiscale procède d'une volonté de s'affranchir des règles nationales et profiter du jeu concurrentiel entre pays.
    Keywords: tax evasion, tax exile, tax justice, tax policy, evasion fiscale, exil fiscal, justice fiscale, politique fiscale
    Date: 2022
  4. By: Ferran Sancho
    Abstract: We explore the relationship between the tax system and the surplus-value rate. Since government policy directly conditions the economic environment, any variations in the tax rates will affect disposable income. This, in turn, translates to consumption adjustments that give rise to changes in the surplus-value rate. For the evaluation of changes from the baseline figure, we argue that the correct data set needs to be more comprehensive than the input-output and national accounts data. The reason is that they do not include, in a coherent and integrated manner, all the tax flows taking place in the economy. A Social Accounting Matrix (SAM), however, does include all the tax flows affecting households (indirect taxes on consumption, direct taxes on income, and personal labour taxes). Therefore, the SAM provides the basis for counter-factual calculations of the surplus-value rate that a standard input-output table, for example, cannot provide. We illustrate the possibilities of the analysis using a recent SAM of Spain.
    Keywords: Surplus-value rate, Social Accounting Matrix, Taxation and consumption, Policy indicators.
    JEL: B51 C54 H22
    Date: 2023–03–21
  5. By: Saulitis, Andris; Chapkovski, Philipp
    Abstract: This study employs a field experiment and qualitative content analysis to examine the effect of various behaviourally-informed messages on increasing tax compliance in Latvia. In a field experiment, more than 3, 000 businesses received a message with a normative appeal to increase the relatively low salaries compared to firms operating in the same industry and region. Other treatment groups received the same message with an additional paragraph that varied audit probabilities or included prosocial messages. All treatments effectively increased the average declared salaries in the enterprises relative to not sending a message. Even though the overall fiscal effect was positive, the qualitative analysis of the feedback by the firms indicates that messages, particularly those that did not state the future actions of the tax administration, provoked discontent and distrust between the taxpayer and the tax administration. Our findings demonstrate that clear communication of the intended actions of the tax administration is the most effective approach to promoting tax compliance. Furthermore, our research indicates that a relatively small audit probability (5%) is as effective as a larger probability (66%), implying that there is no need to carry out audits on a large scale to address tax evasion.
    Keywords: tax collection; shadow economy; prosocial behaviour; tax audits; mixed-methods
    JEL: C93 D03 H26 H32 H83
    Date: 2023–03–01
  6. By: Giorgio Fabbri; Marie-Louise Leroux; Paolo Melindi-Ghidi; Willem Sas
    Abstract: This paper develops an overlapping generations model which links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status during old age, by introducing a component which is indexed to society’s average level of disability. This way, reducing disability during old age lowers the pension benefit as the need to finance long-term care services also drops. We then study the effects of introducing such a ‘comprehensive’ social security system on individual decisions, capital accumulation, and welfare. We first show that under certain conditions, health investments can boost savings and capital accumulation in the long run. Second, we show that if individuals are sufficiently concerned with their health when old, it is optimal to introduce a health-dependant pension system, as this will raise social welfare compared to a system where pensions are not tied to the society’s average level of old-age disability. Our analysis thus highlights an important policy recommendation: making PAYG pension schemes partially health-dependent can be beneficial to society.
    Keywords: Curative Health Investments, PAYG Pension System, Disability, Overlapping Generations, Long-term Care
    JEL: H55 I15 O41
    Date: 2022–12
  7. By: International Monetary Fund
    Abstract: This report presents the estimates of tax gaps for corporate income tax (CIT) for non-financial corporations in Slovenia by applying the methodology of the IMF’s RA-GAP (Revenue Administration – Gap Analysis Program). This work is being undertaken under the context of the larger project designed to strengthen the administration of corporate income tax (CIT) by the Slovenian Financial Administration (SFA). Providing support towards building the capacity of the SFA to estimate and analyze the CIT gap will assist in achieving the overall goals of the project to: (i) strengthen core tax administration functions, and (ii) strengthen revenue administration, management, and governance arrangements.
    Date: 2023–03–10
  8. By: Cristiana Belu Manescu; Elva Bova; Martijn Hoogeland; Philipp Mohl
    Abstract: This paper investigates how national fiscal rules have supported numerical compliance with EU fiscal rules. Using a novel dataset of numerical compliance with national fiscal rules, the relationship between national and EU rule compliances is explored using both descriptive analysis and panel regression analysis applied for fiscal rules in place between 1998 and 2019. The descriptive analysis shows that compliance with national and EU rules is on average higher in low-debt situations, with compliance with EU fiscal rules somehow higher than for national rules. Panel regressions show that the simple presence of a national fiscal rule does not seem to matter for EU rule compliance. However, national rules that are complied with and are well designed are associated with compliance with almost all types of EU fiscal rules. Against the usual caveats on panel regressions, the results suggest that rule design, monitoring and enforcement can enhance ownership and therefore compliance with numerical fiscal rules.
    JEL: H60 H11 E62
    Date: 2023–02
  9. By: AGUIMA AIME BERNARD LOMPO (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This study examines the effect of financial development on tax revenue mobilization in developing countries. Our empirical analysis uses the aggregate financial index that comprises the banking system's depth (size and activity), access, and efficiency of financial institutions and financial markets. Using panel data from developing countries over the period 1995-2017, our findings suggest that more developed financial sectors positively and significantly influence the government's ability to raise tax revenue. More interestingly, we find that this favorable effect is sensitive to developing countries characteristics, namely the level of economic development, the degree of financial openness and the stance of fiscal policies. When we more precisely look at the effects of disaggregated financial development components on tax revenues mobilization, we find that the estimated coefficients on the sub-components of financial development are statistically significant, except for the financial market's efficiency. The results denote that tax revenue in developing countries depends on financial institutions and financial markets.
    Keywords: Financial development, Non-resource tax revenue, Domestic tax revenue, Developing countries
    Date: 2023–02–04
  10. By: Jorge Puig; Alberto Porto
    Abstract: This paper analyzes the evolution of subnational fiscal variables in Argentina with a long-term vision. The period covers 1959-2019. The first part shows stylized facts of the main provincial fiscal variables over time. The second part studies the interaction between intergovernmental transfers on the level and the structure of provincial own revenues and expenditures. Econometric analysis, that controls for typical endogeneity problems, indicates that higher transfers do not reduce provincial own revenues and increase public expenditure. Higher transfers also bias the composition of provincial own resources towards non-distortive taxes and towards higher capital expenditure. The remarkable heterogeneity of the subnational governments in Argentina plays a key role when determining the results. As a whole findings might have important policy implications on subnational governments' public finance.
    JEL: H25 H29 H41 H71 H77
    Date: 2022–11
  11. By: Congressional Budget Office
    Abstract: This report describes the size and nature of the federal government’s credit and insurance portfolios. For this analysis, CBO developed three measures of credit and insurance activity—the covered amount, the net covered amount, and the allowance for losses.
    JEL: G10 G18 G21 G22 G28 H12 H81 J32 Q54
    Date: 2023–03–21
  12. By: Redhead, Daniel Dr.; Maliti, Emmanuel; Andrews, Jeffrey; Borgerhoff Mulder, Monique
    Abstract: The extent of inequality in material wealth across different types of societies is well established. Less clear, however, is how material wealth is associated with relational wealth, and the implications of such associations for material wealth inequality. Theory and evidence suggest that material wealth both guides, and is patterned by, relational wealth. While existing comparative studies typically assume complementarity between different types of wealth, such associations may differ for distinct kinds of relational wealth. Here, we first review the literature to identify how and why different forms of relational wealth may align. We then turn to an analysis of household-level social networks (food sharing, sex-specific friendship and sex-specific co-working networks) and material wealth data from a rural community in Pemba, Zanzibar. We find that (a) different forms of relational wealth have similar structural properties and are closely aligned, (b) relational wealth is patterned by gender differences, and (c) material wealth has distinct associations with different forms of relational wealth, which are also patterned by gender. More broadly, we show how examining the patterning of distinct types of relational wealth provides insights into how and why the social implications of material wealth are still muted in a community undergoing rapid economic change.
    Date: 2023–02–11
  13. By: Matías Ciaschi; Santiago Garganta
    Abstract: There is a vast literature studying the effects of social transfers on women’s decision-making power within households. The evidence typically shows a positive impact in this regard measured by female expenditure-related decisions. However, the higher women’s relevance as a decision-maker driven by social programs could also increase their responsibilities, limit their autonomy in other several dimensions and hence exacerbate traditional gender roles. In this paper we empirically evaluate the theoretically ambiguous effect of a CCT program in Argentina - the AUH - on women’s intra-household bargaining power. The implementation of the AUH implied a significant increase on women’s household income share given that they were prioritized as recipients of the benefit. However, our main results suggest the program increased couple stability and did not change women’s probability of being the main household member in charge of domestic chores. Moreover, we find that the program decreased bargaining power for women with more children, for whom the AUH benefit is larger.
    JEL: H55 I38 J12 J16
    Date: 2022–11

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