nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒10‒09
nine papers chosen by
Thomas Andrén, Konjunkturinstitutet

  1. Tax Treaty Shopping and Developing Countries By van 't Riet, Maarten; Lejour, Arjan
  2. Mortality Regressivity and Pension Design By Youngsoo Jang; Svetlana Pashchenko; Ponpoje Porapakkarm
  3. Tax Credits for Clean Electricity: The Distributional Impacts of Supply-Push Policies in the Power Sector By Maxwell L. Brown; Jon M. Becker; Jared Carbone; Teagan Goforth; James McFarland; Destenie Nock; Kristina Pitman; Daniel C. Steinberg
  4. Limits to Competition: Strategies for Promoting Jurisdictional Cooperation By David R. Agrawal
  5. Building Tax Capacity in Developing Countries By Juan Carlos Benitez; Mario Mansour; Miguel Pecho; Charles Vellutini
  6. Influence of tax structures on income inequality in WAEMU countries By Zabsonre Zacharia; Boukary Ouedraogo
  7. Public Education, Pension and Debt Policy By Kazumasa Oguro; Masaya Yasuoka
  8. Taxes, Regulations, and the Value of U.S. Corporations: A Reassessment By Ellen R. McGrattan
  9. Graying and Staying on the Job: The Welfare Implications of Employment Protection for Older Workers By Morris, Todd; Dostie, Benoit

  1. By: van 't Riet, Maarten; Lejour, Arjan
    Abstract: Analysis of the international network of double tax treaties reveals a large potential for tax avoidance. Developing countries are, on average, not more likely to suffer from tax revenue losses than other countries. Yet, this average masks the fact that several countries, such as Bangladesh, Egypt, Indonesia, Kenya, Uganda and Zambia, are vulnerable to substantial potential losses of withholding tax revenue by treaty shopping. The treaties responsible for this are referred to as potentially aggressive tax treaties.
    Keywords: Development Policy, Finance, Governance,
    Date: 2023
  2. By: Youngsoo Jang (University of Queensland); Svetlana Pashchenko (University of Georgia); Ponpoje Porapakkarm (National Graduate Institute for Policy Studies)
    Abstract: How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.
    Keywords: mortality-related redistribution, pensions, social security, annuities, life-cycle model
    JEL: G22 H21 H55 I38
    Date: 2023–09
  3. By: Maxwell L. Brown; Jon M. Becker; Jared Carbone; Teagan Goforth; James McFarland; Destenie Nock; Kristina Pitman; Daniel C. Steinberg
    Abstract: We evaluate distributional and efficiency consequences of the bulk power clean electricity tax credits authorized by the 2022 Inflation Reduction Act. To do so, we link detailed electricity capacity expansion, computable general equilibrium, data-rich microsimulation, and air pollution models to estimate the policy incidence in terms of economic welfare and health impacts across a wide range of demographic groups. We evaluate the tradeoff between policy efficiency and income progressivity by comparing the tax credits to cap-and-trade policies that vary revenue recycling approaches. Under the scenarios analyzed the bulk power tax credits lead to increased clean electricity technology deployment resulting in a reallocation of capital from elsewhere in the economy, higher prices for capital and other goods, lower power prices, and lower emissions. The tax credits yield progressive outcomes for both economic welfare and health impacts. The health benefits exceed total policy costs and provide greater benefits for low-income and historically-marginalized households given the coincidence of household and emission source locations.
    JEL: Q43 Q48
    Date: 2023–08
  4. By: David R. Agrawal
    Abstract: Inefficiencies from tax competition may result in governments seeking to limit fiscal competition via tax treaties, harmonization, minimum tax rates, or interjurisdictional cooperation. I propose a general model applicable to studying many types of taxing instruments, which allows for the comparison of various policy responses to promote jurisdictional cooperation. Comparing across policies, the model suggests a clear revenue dominance of partial harmonization among a subset of jurisdictions. Minimum tax rates revenue-dominate complete harmonization, but fail to raise revenues as much as partial harmonization. A selective review of the empirical literature identifies evidence consistent with the predictions of the theoretical model. The framework sketched in this paper can be further enriched by researchers seeking to determine the welfare effects of policy responses to interjurisdictional competition.
    JEL: C7 H2 H7 R5
    Date: 2023–09
  5. By: Juan Carlos Benitez; Mario Mansour; Miguel Pecho; Charles Vellutini
    Abstract: Tax capacity—the policy, institutional, and technical capabilities to collect tax revenue—is part of a deeper process of state building that is essential for achieving the sustainable development goals. This Staff Discussion Note shows that developing countries have made some progress in revenue mobilization during the past decades. However, much more is needed. We find that a staggering 9 percentage-point increase in the tax-to-GDP ratio is feasible through a combination of tax system reform and institutional capacity building. Achieving this calls for a holistic and institution-based approach that focuses on improving policy, administration and legal implementation of core taxes. The note offers practical lessons and guidance, based on IMF capacity building experience in this area.
    Keywords: Taxation; development; institutions; tax capacity; building tax analysis capacity; tax Effort estimate; tax potential; analysis capacity; VAT revenue; Tax administration core functions; Value-added tax; Property tax; Tax law; Global; Sub-Saharan Africa; Middle East and Central Asia; Western Hemisphere; Asia and Pacific
    Date: 2023–09–19
  6. By: Zabsonre Zacharia (CEDRES - Centre d'Etudes, de Documentation et de Recherches Economique et Sociale - UJZK - Université Joseph Ki-Zerbo [Ouagadougou], UTS - Université Thomas Sankara); Boukary Ouedraogo (CEDRES - Centre d'Etudes, de Documentation et de Recherches Economique et Sociale - UJZK - Université Joseph Ki-Zerbo [Ouagadougou], UTS - Université Thomas Sankara)
    Abstract: Extreme inequalities often engender the kind of poverty that has major implications for the enjoyment of civil and political rights (Alston, 2019). Left unchecked, it can lead to oligarchy, socio-political unrest, political instability, insecurity crises (Miller, 2021; Tanzi, 2018; Karen, 2017). Yet all citizens are legitimately entitled to a share of income generated by the state because they agree to obey the legitimacy of the state and the prosperity of its members (Hemel, 2019). Income distribution before tax may change due to changes in tax regimes (Bourguignon, 2015). The present research therefore aims to analyze the influence of the tax structure on income inequality in WAEMU over the period 2000-2020. To do this, the technique of least squares in two stages is used. The results show that progressive and regressive taxation positively affect income inequality in the WAEMU area. The overall level of taxation and proportional taxes do not have a significant effect on income inequality in WAEMU countries. Therefore, to reduce income inequality, WAEMU countries have an interest in reducing both regressive taxes, and progressive taxes. But the decline of the former must be greater than the latter.
    Abstract: Les inégalités extrêmes engendrent souvent le genre de pauvreté qui a des implications majeures pour la jouissance des droits civils et politiques (Alston, 2019). Laissée sans contrôle, elle peut conduire à l'oligarchie, aux troubles socio-politiques, à l'instabilité politique, aux crises d'insécurité (Miller, 2021 ; Tanzi, 2018 ; Karen, 2017). Pourtant, tous les citoyens ont légitimement droit à une part de revenus généré par l'Etat du fait qu'ils acceptent obéir à la légitimité de l'État et à la prospérité de ses membres (Hemel, 2019). La répartition du revenu avant impôt peuvent changer suite à des modifications des régimes fiscaux (Bourguignon, 2015). Le présent travail de recherche vise donc à analyser l'influence de la structure fiscale sur l'inégalité de revenu dans l'UEMOA au cours de la période 2000-2020. Pour ce faire, la technique des moindres carrés en deux étapes est utilisée. Les resultats prouvent que l'imposition progressive et celle régressive affectent positivement l'inégalité de revenus dans la zone UEMOA. Le niveau global de la fiscalité ainsi que les impôts proportionnels n'ont pas d'effet significatif sur l'inégalité de revenu dans les pays de l'UEMOA. Par conséquent, pour réduire l'inégalité de revenu, les pays de l'UEMOA ont intérêt à réduire et les impôts régressifs, et les impôts progressifs. Mais la baisse des premiers doit être plus importante que les derniers.
    Keywords: Income inequality, Progressive taxes, Regressive taxation, WAEMU, Taxation Résumé., OUEDRAOGO Boukary, Income inequality Progressive taxes Regressive taxation WAEMU Taxation Résumé, OUEDRAOGO Boukary, Income inequality, Taxation Résumé, Inégalité de revenus, Impôts progressifs, Imposition régressive, UEMOA, Fiscalité.
    Date: 2023–08–23
  7. By: Kazumasa Oguro (Hosei University); Masaya Yasuoka (School of Economics, Kwansei Gakuin University)
    Abstract: In some OECD countries, public debt is increasing to the point that fiscal reforms should be considered. Our paper sets a government budget constraint with the deficit of primary balance and examines how such a policy affects public debt in the long run. In the model, we consider policies of three types to reduce the deficit of primary balance: decreases in pension benefits and public education investment, and an increase in income tax. A decrease in pension benefit or an increase in tax revenues can inevitably raise the capital stock per unit of effective labor. Depending on the parametric conditions, they can also reduce the public debt per unit of effective labor and the ratio of public debt to gross domestic product (GDP).
    Keywords: Education Investment, Fiscal Sustainability, Pension, Public Debt
    JEL: H63 H20 E61 I28
    Date: 2023–09
  8. By: Ellen R. McGrattan
    Abstract: This paper reassesses the conclusions of McGrattan and Prescott (2005), which derived the quantitative implications of growth theory for U.S. corporate valuations. In addition to having two more decades of data, the analysis incorporates recent changes in policies that affect corporate investments, taxes, and legal-form choice. Secular trends identified in the earlier period remain, with little change in the tangible capital-output ratio or profit share of output. Corporate valuations remain high relative to the postwar average, in line with the theoretical prediction. Critical to this prediction is the decline in effective tax rate on distributions and the rise of foreign direct investment abroad. With the recent enactment of the Tax Cuts and Jobs Act, corporate valuations are predicted to rise even further relative to GDP.
    Keywords: Taxation; Stock market; Productive capital stocks
    JEL: E62 G18 E44
    Date: 2023–07–12
  9. By: Morris, Todd (HEC Montreal); Dostie, Benoit (HEC Montreal)
    Abstract: We study the welfare implications of employment protection for older workers, exploiting recent bans on mandatory retirement across Canadian provinces. Using linked employer- employee tax data, we show that the bans cause large and similar reductions in job separation rates and retirement hazards at age 65, with further reductions at higher ages. The effects vary substantially across industries and firms, and around two-fifths of the adjustments occur between ban announcement and implementation dates. We find no evidence that the demand for older workers falls, but the welfare effects are mediated by spillovers on savings behavior, workplace injuries, and spousal retirement timing.
    Keywords: employment protection, retirement, welfare, active and passive savings responses, health effects, spousal spillovers
    JEL: J26 J78 H55
    Date: 2023–09

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