|
on Public Economics |
| By: | Miller, Helen; Pope, Thomas; Smith, Kate |
| Abstract: | We use newly linked tax records to show that the large responses of UK company owner-managers to personal taxes are due to intertemporal income shifting and not to reductions in real business activity. Around half of this shifting is short-term and helps prevent volatile incomes being taxed more heavily under progressive personal taxes. The remainder reflects systemic profit retention over long periods to take advantage of lower tax rates, including preferential treatment of capital gains. We find no evidence that this tax-induced retention increases business investment. It does, however, substantially reduce the tax revenue raised from high income business owners. |
| JEL: | J1 C1 |
| Date: | 2024–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121654&r=pbe |
| By: | Yimam, Seid; Lidetu, Kebede; Belete, Tihtina |
| Abstract: | In the last decade, tax administrations in developing countries have been introducing technological innovations such as e-filing and e-payment platforms. The main aim of introducing these technologies is to improve tax compliance and boost revenue collection by increasing convenience and flexibility for taxpayers and reducing their compliance costs. E-filing and e-payment could save taxpayers time preparing and returning taxes and reduce errors and opportunities for corruption. However, the adoption of these technologies and their effectiveness in improving tax compliance could be undermined by several factors. Using tax administrative records, we examined the adoption rate trend of the e-filing system and the correlation between e-filing adoption and tax compliance of large and medium taxpayers in Ethiopia. The timeliness of value-added tax (VAT) and corporate income tax (CIT) return filing and the amount of tax declared are the two main compliance indicators used in this study. Furthermore, we explored the existing challenges and the way forward to improve the adoption of the e-tax system using focus group discussions (FGDs). |
| Keywords: | Economic Development, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18216&r=pbe |
| By: | Canavire Bacarreza, Gustavo J. (World Bank); Aliaga, Guillermo Gómez (World Bank); Britton, Chevanne (Grenada’s Ministry of Finance); Rios-Avila, Fernando (Levy Economics Institute); Pozo, Wilson Jimenez (Fundacion Aru); Ibarra, Silvia Granados (World Bank); Li, Ran (World Bank) |
| Abstract: | This paper examines the distributional effects of fiscal policy in Grenada. Using data from the 2017–2018 Living Conditions and Household Budgets Survey and following the Commitment to Equity (CEQ) analysis framework, we estimate the effects of fiscal policy interventions on inequality and poverty. Specifically, we analyze the distributional incidence of direct and indirect taxes, direct transfers provided by the social transfers and the school feeding programs, and in-kind transfers generated by public services in health and education. The results show that Grenada has a tax system that is neutral on the VAT side and progressive on the personal income tax side. Furthermore, direct transfers make a modest contribution to poverty reduction and are almost neutral in their distributive impact. The results contribute to the understanding of who bears the burden of taxation and benefits from transfers and of how Grenada's fiscal system can improve its redistributive effect. |
| Keywords: | fiscal incidence, poverty, inequality, taxes, social transfers, public expenditure, public revenue |
| JEL: | D31 H11 H22 H5 I14 I24 I3 O54 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16795&r=pbe |
| By: | Laudage, Sabine |
| Abstract: | The Base Erosion and Profit Shifting (BEPS) Project of the Organisation for Economic Co-operation and Development (OECD) and the G20 aims to reduce harmful tax avoidance and evasion by multinational enterprises (MNEs), which creates large losses in governments' revenues. In times of multiple crises, many governments urgently seek additional revenue sources to finance public expenditures for sustainable development. In particular, many low- and lower-middle-income countries have tax-to-GDP ratios of less than 15 per cent, which is insufficient to provide basic public goods such as health, education and infrastructure for their populations. This policy brief evaluates the achievements and remaining challenges of the BEPS Project to mobilise more domestic revenues, in particular in low- and middle-income countries (LMICs). After the financial crisis of 2009, the G20 mandated the OECD with the design and implementation of the BEPS Project. The goal was to identify and tackle the most pressing issues that led to the erosion of corporate tax bases in their member countries. A key issue is the phenomenon that MNEs avoid large amounts of tax by shifting their profits from affiliates in high-tax countries to affiliates in low-tax countries. In 2013, the OECD presented its 15-point agenda to tackle BEPS in OECD member states. However, global tax avoidance and profit shifting can only be effectively addressed if a large number of countries is on board. Thus, in 2016, the Project opened for non-OECD/G20 countries to join the Inclusive Framework on BEPS and the implementation process of the BEPS Action Plan. However, tax administrations of many LMICs complain about the highly complex rules designed under the BEPS Action Plan that are not adapted to their context-specific capacities and needs. Today, the Inclusive Framework on BEPS has 145 member countries, and the implementation of the BEPS Action Plan is almost finished. Preliminary academic evidence shows that the overall impact of the BEPS Project in reducing global tax avoidance and profit shifting is indeed limited. According to recent estimates, tax revenue losses due to profit shifting even increased from 9 to 10 per cent in the first years when anti-BEPS measures were implemented (see Wier & Zucman, 2022). Since there is no counterfactual world in which the BEPS Project did not take place, we can only assume that tax avoidance would have increased even more in the absence of the Project. However, the BEPS Project is still considered the biggest overhaul of global tax rules since the last century. Positive achievements include increased awareness of MNEs' profit shifting behaviour, as well as the agreement on a global minimum tax. To tackle BEPS challenges more successfully - globally and in particular in LMICs - international tax cooperation needs to become more effective in three dimensions: Inclusive decision-making process: Countries should show more political will to combat tax avoidance and stop blocking more comprehensive international tax reforms. Truly inclusive cooperation between OECD and non-OECD countries is needed. Mandatory implementation: Many BEPS Actions were voluntary standards and, thus, not many countries introduced them into their domestic tax laws. To fight BEPS effectively, more mandatory tax rules need to be included in future reform packages. Simplified rules: Several BEPS Actions were watered down and became highly complex because individual countries bargained for carve-outs. Future international tax rules need to be more ambitious and simplified in this regard. Bilateral and multilateral development cooperation agencies should provide low-income countries with capacity building and assistance in implementing tax rules. |
| Keywords: | Domestic revenue mobilisation, tax avoidance, BEPS, Inclusive Framework, tax cooperation, mutinational enterprises |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:idospb:283118&r=pbe |
| By: | Banga, Karishma; Beyleveld, Alexander |
| Abstract: | African countries are currently considering provisions in the AfCFTA and at the WTO to liberalise digital trade. As they face mounting fiscal pressures, it is imperative that they beware the implications of digital trade provisions for their ability to tax their digital economy. In this paper, we develop a comprehensive framework for analysing the impact of trade rules on tax regimes in the digital economy, with a focus on Kenya, Rwanda, and South Africa. We explore how trade rules ostensibly shape tax policies and their implications for revenue generation. By examining rules regulating trade in services and the imposition of customs duties on electronic transmissions, we identify how these rules may directly impact tax policies and limit revenue generation possibilities. Moreover, digital trade rules, such as those related to data flows, localisation, and source code sharing, have the capacity to produce both indirect and administrative effects on tax measures. These rules can alter tax structures, taxation rights, data collection, and the capacity to monitor and implement tax measures. Our findings shed light on the complex interplay between trade rules and tax measures, highlighting potential challenges and opportunities for revenue generation from the digital economy in African countries. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18223&r=pbe |
| By: | Odran Bonnet; Étienne Fize; Tristan Loisel; Lionel Wilner |
| Abstract: | This article exploits both the crude oil price surge consecutive to the invasion of Ukraine and 2022 fuel excise tax rebates in France as quasi-natural experiments to infer the price sensitivity of fuel demand. Based on granular individual bank account data at the transaction level, we properly disentangle anticipation effects from price effects, and estimate an average price elasticity of -0.31. It varies little with respect to income and location but substantially decreases, in absolute, with respect to fuel spending and is higher for retirees. We evaluate financial and distributional effects of the actual tax policy as well as its impact on CO2 emissions based on counterfactual simulations. We empirically demonstrate that resorting to transfers, be they targeted or not, achieves only imperfect compensation against fuel inflation. However, we show that a policy maker subject to a tight budget constraint and seeking to alleviate excessive losses, relative to income, prefers means-tested transfers to rebates. |
| Keywords: | commodity taxation, excise tax, tax-and-transfer schemes, fuel price elasticity, anticipatory behaviour, transaction-level data |
| JEL: | C18 C51 D12 H23 H31 L71 Q31 Q35 Q41 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10917&r=pbe |
| By: | Juliana Londoño-Vélez; Javier Avila-Mahecha |
| Abstract: | We study behavioral responses to personal wealth taxes in Colombia. We utilize tax microdata from 1993 to 2016 linked with the leaked Panama Papers to investigate offshoring to the country’s key tax havens. We leverage variation from discrete jumps in tax liability and four major reforms to the wealth tax system, including changes in tax rates and duration, using bunching and difference-in-difference techniques. We find compelling evidence that taxpayers instantly reduce the wealth they declare in response to a wealth tax. Moreover, these effects can persist for years even after the wealth tax is no longer in place, providing the first evidence of a hysteresis effect for a temporary tax policy. The response is driven by misreporting items that authorities cannot cross-verify, such as overstating debt and understating non-third-party-reported business assets. Additionally, the wealthiest taxpayers respond to wealth tax increases by hiding assets in hard-to-track entities in tax havens. |
| JEL: | H24 H26 O23 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32134&r=pbe |
| By: | Olivier Cardi; Fatma Hoke; Romain Restout |
| Abstract: | By exploiting the downward trend of profits' taxation observed in OECD countries which is rooted into international competition to attract capital, we identify exogenous variations in the corporate income tax rate. Estimating a SVAR model with long-run restrictions for a panel of eleven OECD countries over 1973-2017, we find that a permanent decline in profits' taxation leads to significant technology improvements which are concentrated in traded industries. The corporate tax cut has also an expansionary effect on hours concentrated in non-traded industries. The country-split shows that technology significantly improves in English-speaking and Scandinavian countries only while hours persistently increase only in continental European countries. To account for the dynamic effects of a corporate tax cut, we consider a two-sector open economy model with tradables and non-tradables and endogenous technology decisions where both capital and technology can be used more intensively. The model can account for the magnitude of technology improvements we estimate empirically as long as the traded sector is intensive in R&D, experiences low costs in the use of the stock of knowledge and also highly benefits from international R&D spillover. While large elasticities of utilization-adjusted-TFP w.r.t. the domestic and international stock of knowledge must be assumed in English-speaking and Scandinavian countries, in accordance with our estimates, we have to allow for sticky wages in continental European countries to account for our evidence. |
| Keywords: | Corporate taxation, SVAR, Open economy, Endogenous technological change, R&D, Hours worked, Tradables and non-tradables, Labor reallocation, Wage stickiness |
| JEL: | E23 E62 F11 F41 H25 O33 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:408700700&r=pbe |
| By: | Avi-Yonah, Reuven S. |
| Abstract: | This Perspective explores the implications for the home countries of large MNEs of the agreement reached by over 140 countries in 2021 to enact a corporate minimum tax of 15%. It argues that the corporate minimum tax complements the trend to reduce the negative impact of unfettered globalization on labor, and it protects the ability of home countries to finance a robust social safety net. Home countries should adopt the corporate minimum tax, and that includes the US, which last year failed to adapt its Global Intangible Low-Taxed Income approach to the corporate minimum tax. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:colfdi:283054&r=pbe |
| By: | Eirik S. Amundsen |
| Abstract: | For a long time, Norway has had resource rent taxes on oil- and natural gas extraction as well as on hydropower generation. Recently, resource rent taxes have also been levied on aquaculture, and wind power generation. This paper, gives a short overview of the rent theory, the basis for rent generation in Norway, the size of rent generated, the Norwegian tax system for resource rent for each of the resources considered, and the rent taxes collected. |
| Keywords: | natural resources, rent taxes, oil and gas, hydropower, wind power, aquaculture |
| JEL: | H20 H25 Q22 Q25 Q38 Q48 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10911&r=pbe |
| By: | Paukkeri, Tuuli; Ravaska, Terhi |
| Abstract: | We study whether disability insurance (DI) recipients increase their labour supply after the introduction of an automatic reinstatement policy, i.e. a programme mitigating the risk of losing eligibility for DI benefits due to a trial period of substantially increased work. We use Finnish administrative data and identify the effect of the policy on partial DI recipients by using partial DI applicants whose application was rejected as a control group. Partial DI recipients by definition have substantial remaining work capacity and are therefore potentially more responsive to programmes affecting work incentives than full DI benefit recipients. The rejected individuals have similar work histories, health impairments and remaining work capacity to those who are allowed benefits, enabling us to estimate the effects of automatic reinstatement on labour supply with a credible control group. Based on our estimation results, automatic reinstatement of benefits increases annual earnings modestly, but for those with mental disorders the effect is larger. |
| Keywords: | disability insurance, labour supply, automatic reinstatement, Social security, taxation and inequality, J14, H55, fi=Sosiaaliturva|sv=Social trygghet|en=Social security|, fi=Työmarkkinat|sv=Arbetsmarknad|en=Labour markets|, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:163&r=pbe |
| By: | KOIZUMI Hideto |
| Abstract: | The effectiveness of tax policies targeting firms has been evaluated conventionally based on the effects on the firms that are directly affected by the tax policies. However, the indirect effects through the supply chains of the directly affected firms can also be of first-order importance. This paper estimates the indirect effects on firm performance of tax incentives for investment through production networks, exploiting the quasi-experimental event of an investment stimulus policy targeting small and medium enterprises and unique proprietary data of supply chains in Japan. After confirming the direct effects, I find evidence suggesting that the indirect effects on direct suppliers are even larger than the direct effects, while no discernible effects are found on downstream firms. The absence of downstream effects appears to stem from the fact that treated firms crowd out the market share of untreated large firms, leading to an insufficient change in market prices. In total, while the tax policy successfully stimulates the targeted small firms, its spillover effects are primarily confined to the upstream customers which tend to be large. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:24025&r=pbe |
| By: | Doina Muresan (Dimitrie Cantemir Christian University, Bucharest, Romania) |
| Abstract: | The use of technology has steadily increased over the years, however, there is wide variation between people of different ages, with skills higher among younger “digital natives†and lower among older people. The daily use of the Internet among the Romanian population has increased considerably since 2014, proving the increase in the population’s comfort and confidence in using digital technologies and the Internet. Unsurprisingly, the level of digitization among businesses and individuals in Romania differs between regions. The level of digitization is higher in cities than in rural areas and the highest rate is, as expected, in Bucharest, Cluj and the North of the country. Reducing the knowledge and capacity gap between the country's areas can be done through a digitalization plan for the economy, similar to those published by the governments of many other countries, and through the digitalization of the interaction between SMEs and government institutions. The Romanian government is currently going through a significant process of digitizing both its own internal operations and the way it interacts with people and the business environment, for example through electronic signatures and the online takeover of tax-related matters. However, the constraints on government institutions derived from the lack of information determine opportunities for tax avoidance and evasion and inevitably favor compromise. Digitization can help alleviate these constraints in two ways: by implementing more accurate methods to verify the true economic results of taxpayers by connecting information existing in different parts of the tax system or by implementing more sophisticated tax systems. |
| Keywords: | advanced technologies, digitization, data storage, communication networks, taxes |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0322&r=pbe |
| By: | Rosenqvist, Olof (IFAU - Institute for Evaluation of Labour Market and Education Policy); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy) |
| Abstract: | Take-up of social benefits is a central issue in poverty alleviation and fis cal evaluations of policy reforms. However, it is difficult t o fi nd exogenous variation in the benefit level, and little is therefore known about take up responses to basic financial i ncentives. We exploit large and plausibly random variation in levels of ”flat rate parental leave benefits”, which all Swedish parents are entitled to. There are no financial r easons t o leave money on the table, but take-up is nevertheless imperfect. Higher benefits substantially increase claiming across the income d istribution. We fur ther detect sizeable spill-over effects on subsequent take-up of low-income earners. |
| Keywords: | Parental benefits; incomplete take-up; after-tax benefits; |
| JEL: | H24 J22 |
| Date: | 2023–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2023_024&r=pbe |
| By: | Karolos Arapakis; Gal Wettstein; Yimeng Yin |
| Abstract: | Social Security’s design is known to help Black individuals and those with lower socioeconomic status due to the progressive benefit formula, but this effect is partially offset by the shorter life expectancies of these groups. However, valuing Old-Age and Survivors Insurance (OASI) solely on expected benefits neglects the program’s longevity insurance value, which favors individuals facing greater uncertainty over their lifespans. This paper uses a structural model to measure the value of the program’s longevity insurance for stylized households that differ by race, education, and marital status. Wealth equivalence calculations indicate that all stylized households value OASI at least as much as their lifetime OASI tax contributions. The results also indicate that Black households derive more longevity insurance value from OASI than their White counterparts. Hence, OASI increases racial equity in retirement even more than suggested by measures based on expected benefits alone. |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2023-14&r=pbe |
| By: | Massimo Bordignon (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Tommaso Colussi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Francesco Porcelli |
| Abstract: | This paper empirically investigates the impact of populist governments on public policies and finances. We focus on Italian local governments (i.e. municipalities) over the 2010-2019 period, when a populists, i.e. the Five Stars Movement, became the most voted party in the country. We first document that the re-election probability of incumbent mayors drops by half when they are populist. While populist mayors are not less qualified than mainstream parties, they are significantly younger and less experienced. Estimates from a stacked diff-in-diff design comparing early to not-yet treated municipalities show that the populist government experience significantly worsen municipal finances. Populist mayors also fail to promote social and environmental policies that align with the political demands of their voters, possibly contributing to their difficulties in securing re-election. |
| Keywords: | Populism, Local Governments, Fiscal Policy, Inequality. |
| JEL: | H70 H72 P43 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie1:def132&r=pbe |