|
on Public Economics |
| By: | Andrew Bibler; Laura Grigolon; Keith F. Teltser; Mark J. Tremblay |
| Abstract: | Governments increasingly use changes in tax rules to combat evasion. We develop a general approach to point-identify tax compliance along with supply and demand elasticities; identification requires data on prices and quantities before and after changes in tax enforcement and a demand or supply shifter. We illustrate our approach using data on Airbnb collection agreements, where full enforcement is achieved by shifting the tax burden away from hosts to renters via the platform. We find that taxes are paid on roughly zero to 3.5 percent of Airbnb transactions prior to enforcement. |
| Keywords: | tax evasion, compliance, statutory incidence, tax invariance, Airbnb, sharing economy, voluntary collection agreements |
| JEL: | H20 H22 H26 L10 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10921&r=pbe |
| By: | James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (Queen Mary, University of London); Paolo Surico (London Business School and CEPR) |
| Abstract: | Using a narrative identification of US tax changes over the post-WWII period, we show that corporate income tax cuts foster R&D spending and innovation, leading to a persistent increase in aggregate productivity and output. In contrast, changes in the average personal income tax rate have mostly short-term e ects. An estimated endogenous productivity model highlights therole of "applied research" - over and above formal R&D - as a main force behind these results, and suggests a social rate of return to investment in innovation between 20% and 75%. |
| Keywords: | corporate taxes, narrative identification, TFP, R&D, technological adoption. |
| JEL: | E23 E62 O32 O34 O38 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:970&r=pbe |
| By: | Gustafsson, Johan (Department of Economics, Umeå University) |
| Abstract: | The present paper studies how to encourage longer careers by reducing labor income taxes for older workers. The analysis relies on numerical experiments within a general equilibrium overlapping generations model that is calibrated to an average OECD economy. I find that the policy can delay retirement and increase tax revenue if treatment occurs close to, and before, the preferred retirement age. A non-trivial share of the increased post-treatment labor supply can be explained by the substitution of hours worked from the pre-treatment career to the post-treatment career. Lowering the treatment age only leads to small changes in the aggregate labor supply, but is increasingly costly for the government in terms of forgone revenue. Tax shifting toward higher consumption taxes always increases welfare, while tax shifting toward higher capital or labor income taxes paid by younger workers only increases welfare if treatment occurs sufficiently late in the career. |
| Keywords: | age-dependent taxation; OLG model; retirement |
| JEL: | E21 H24 J22 |
| Date: | 2024–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:1023&r=pbe |
| By: | Katrine Jakobsen; Henrik Kleven; Jonas Kolsrud; Camille Landais; Mathilde Muñoz |
| Abstract: | Using administrative data on wealth, firm ownership structure, and migration in Sweden and Denmark, we document international migration patterns among the very wealthy, their impact on the economy, and how they respond to wealth taxation. We show that more than 20% of taxpayers liable to pay wealth tax are business-owners, and that the employment, investments, and value-added of these businesses are negatively affected when their owner migrates out of the country. Exploiting three large reforms, we then isolate the causal effect of wealth taxation on the international location choices of the wealthy. We find significant effects on out-migration flows from increases in the effective wealth tax. But, we also document that the overall level of these migration flows is remarkably small, with annual net-migration rates below .01%. As a result, we find that the aggregate economic effects of tax-induced migration are modest in Scandinavia: a one percentage point increase in the average wealth tax rate on the top 2% decreases the stock of wealthy taxpayers by at most 2% in the long run, and lead to a reduction of at most .03% in aggregate employment and at most .1% in aggregate value- added. Hence, our results suggest that trickle-down effects of tax-induced migration by the wealthy do exist, but that they are quantitatively small. |
| JEL: | D31 E21 H20 H31 L26 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32153&r=pbe |
| By: | Mallesh Pai (Rice University); Philipp Strack (Yale University) |
| Abstract: | We consider the optimal taxation of a good which exhibits a negative externality, in a setting where agents differ in their value for the good, their disutility from the externality, and their value for money, while the planner observes neither. Pigouvian taxation is the unique Pareto efficient mechanism, yet it is only optimal if the planner puts higher Pareto weights on richer agents. We derive the optimal tax schedule for both a narrow allocative objective and a utilitarian objective for the planner. The optimal tax is generically nonlinear, and Pareto inefficient. The optimal mechanism might take a Ònon-marketÓ form and cap consumption, or forbid it altogether. We illustrate the tractability of our model by deriving closed form solutions for the lognormal and Rayleigh distribution. Finally, we calibrate our model and derive optimal taxes for the case of air travel. |
| Date: | 2022–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2377&r=pbe |
| By: | Torres, Leonardo Barros; Paczos, Wojtek (Cardiff Business School); Shakhnov, (University of Surrey) |
| Abstract: | We present a theory of determinants of sovereign debt stability on foreign and domestic markets. Besides the two traditional factors - debt size and output contractions, we highlight the role of the third factor: distortionary tax, which hinders the government’s ability to freely raise revenues. We emphasise the impact of tax distortions and output fluctuations on the trade-off between domestic and foreign debt stability. The paper explains why outright defaults in domestic debt are rare, despite its significant share in public debt, and provides insights into optimal debt issuance and taxation strategies. |
| Keywords: | sovereign debt, debt stability, selective default, debt composition, distortionary tax |
| JEL: | F34 G15 H63 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2024/8&r=pbe |
| By: | James Alm (Tulane University); Raul A. Barreto (University of Adelaide) |
| Abstract: | Governments are always dealing with unexpected shocks, like wars, terrorism, financial crises, natural disasters, and the like. A recent prominent example is the SARS-CoV-2 pandemic. Since early 2020, governments around the world have enacted a range of unprecedented measures in an attempt to protect their citizens, with quite mixed results. This varied record has in turn had dramatic effects on peoples perceptions of their government, especially on their trust in government and so on their willingness to obey the many government mandates generated by the pandemic. This willingness to obey government mandates extends well beyond pandemic policies to all other dimensions of government laws and regulations. An important dimension of individual compliance with government mandates is tax evasion. What will be the effects of the pandemic and the associated government policies on post-pandemic tax evasion and economic growth, especially via the effects of government policies on "trust" in the government? In this paper we incorporate both tax evasion and trust in an endogenous growth model in order to examine the short and long run impacts on tax evasion of various shocks -- a pandemic shock, a government policies shock, and a tax morale shock (and the resulting impact on trust in government). We then use real data on 11 representative economies to simulate these effects, economies representing developed and developing countries as well as economies representing governments that opted for various policy responses to COVID-19, modelled as a labor productivity shock. We find that varied public policy responses to the pandemic have immediate and persistent impacts on tax evasion in the short and long run, largely via their effects on trust in government. We also find that these evasion impacts vary in important and predictable ways that depend especially on whether government dealt effectively or not with the pandemic. Our methodology is readily adapted to examine the effects of other shocks and their respective policy responses on trust in government, tax evasion, and economic growth. |
| Keywords: | COVID-19, tax evasion and tax compliance, trust, endogenous growth models |
| JEL: | H26 H30 O40 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2405&r=pbe |
| By: | Olivier Bargain; Damien Echevin; Audrey Etienne; Nicolas Moreau (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion); Adrien Pacifico |
| Abstract: | The present paper investigates the tax returns of French cohabiting couples with children, defined here as neither married nor in a civil union. These couples represent an interesting case, because they form two separate tax units according to French tax laws and must optimally assign their children to one of the parents' tax units to optimize tax rebates. Using administrative tax data and a microsimulation model, we analyze whether cohabiting couples allocate their children to minimize the joint tax burden of the family. We find, however, that children are not optimally allocated in 25% of cases. We interpret the reasons why couples fail to financially optimize their situation by discussing the usual explanations (e.g., transaction costs, "simple rule, " inertia) as well as a more specific reason: the potential non-cooperative behavior of cohabiting couples, possibly related to the lack of a binding agreement or potential asymmetries of information between partners. We also find suggestive evidence regarding heuristics (such as the equal split rule for an even number of children), a large degree of inertia (based on fiscal status changes over two years), and possible non-cooperation (suboptimal couples tend to separate more and marry less in the subsequent period). |
| Date: | 2022–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04440515&r=pbe |
| By: | Alessio Anzuini (Bank of Italy); Elena Pisano (Bank of Italy); Luca Rossi (Bank of Italy); Alessandra Sanelli (Bank of Italy); Enrico Tosti (Bank of Italy); Ernesto Zangari (Bank of Italy) |
| Abstract: | Following the 2007-8 financial crisis, increasing concern surrounding tax avoidance by multinational enterprises (MNEs) drew attention from academia and policy circles alike. Profit shifting practices not only impact revenue and fairness, but also exacerbate global tax competition and generate economic distortions. Tax avoidance by MNEs is achieved through several complex strategies, in which tax havens and offshore financial centres typically play a prominent role. Policy initiatives adopted under the aegis of the G20 and the OECD, including the BEPS plan and the Two-Pillar agreement, attempt to address this issue, but their final impact remains uncertain. The interplay between the tax strategies of MNEs and governments' efforts to attract investments also distorts external economic statistics. Indeed, residency-based reporting blurs the distinction between profit-driven and genuine investments. Recent economic literature has developed methods to better allocate foreign direct investments (FDIs) and portfolio investments, revealing a different picture of international capital flows, both internationally and in Italy, where external statistics show a high incidence of tax havens. |
| Keywords: | profit shifting, tax avoidance, BEPS, Two Pillars, global minimum tax, official statistics, cross-border investments |
| JEL: | F53 H2 K20 K34 M48 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_799_23&r=pbe |
| By: | Pranab Bardhan; Sandip Mitra; Dilip Mookherjee; Anusha Nath |
| Abstract: | Using rural household survey data from West Bengal, we find that voters respond positively to excludable government welfare benefits but not to local public good programs, while reporting having benefited from both. Consistent with these voting patterns, shocks to electoral competition induced by exogenous redistricting of villages resulted in upper-tier governments manipulating allocations across local governments only for excludable benefit programs. Using a hierarchical budgeting model, we argue these results provide credible evidence of the presence of clientelism rather than programmatic politics. |
| JEL: | H40 H75 H76 O10 P48 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32158&r=pbe |