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on Public Economics |
| By: | Koch, Reinald; Schön, Lena |
| Abstract: | This study investigates the impact of dividend taxes on equity mutual fund investments, using the 2018 German Investment Tax Reform as a unique case study. This reform eliminated the foreign tax credit for German fund investors, thereby introducing a new tax planning channel for German equity mutual funds. Analyzing data from 297 German equity mutual funds and comparable non-German equity and bond mutual funds, our findings indicate a significant shift in portfolio allocation post-reform. German equity mutual funds strategically shifted assets to countries with lower withholding tax rates and adjusted investments within countries to avoid taxes after the reform. We also examine the economic impact of the tax reform and find a negative relationship between the tax burden and fund inflows after the reform. Our findings provide valuable perspectives for policymakers, industry practitioners, and researchers by shedding light on the complex interplay between taxes, fund decisions, and investor responses. |
| Keywords: | Dividend Taxes, Mutual Funds, Investment Decisions, Tax Avoidance |
| JEL: | H26 G23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:287738&r=pbe |
| By: | Ådne Cappelen; Aurora G. Hattrem; Thor O. Thoresen (Statistics Norway) |
| Abstract: | How taxation influences income mobility is largely a neglected topic. In this study we discuss the relationship between taxation and income mobility by analyzing both macro and micro data. Administrative register data based on income tax returns are used to produce individual and aggregate measures of income mobility from 1994 to 2021. Income mobility is explained in terms of marginal tax rates on both wage income and capital income. Estimation results are obtained from an autoregressive distributed lag model and a fixed effects linear probability model for the macro and micro data approaches, respectively. The macro and micro evidence point in the same direction — we find that income mobility is negatively influenced by higher marginal tax rates on both earnings and capital income, with the largest effect found for tax on capital income. |
| Keywords: | Income mobility; tax effects; administrative register data |
| JEL: | D31 H24 H30 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:1010&r=pbe |
| By: | Murray, Cameron (The University of Sydney); Helm, Tim (Independent economic consultant) |
| Abstract: | Income tax and welfare withdrawal together penalise additional work effort by generating effective marginal tax rates (EMTRs) on extra income that are often as high as 75-80%. Flatter rate structures to provide fairer and more efficient returns to work require either lower top welfare payments, higher top tax rates, or reform of the tax mix. Levelling state taxes on land up to the benchmark set by the ACT could raise as much as $27 billion more in revenue each year without reducing investment or growth. With changes to Commonwealth-state grants, this could fund a halving of all welfare withdrawal rates, producing an effective tax cut of 20-30 cents in the dollar for over one million workers and extra cash in the pocket for around two million more. |
| Date: | 2024–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:zmypn&r=pbe |
| By: | Francesco Chiocchio (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | How do property taxes affect house prices, homeownership, and welfare? I focus on Italy, a country with high homeownership, an outdated property tax system, and failed reform attempts. As in many other countries, owner-occupied houses are exempt from property taxes in Italy. Additionally, property taxes are calculated using outdated cadastral values. I show that using cadastral values creates a regressive property tax since cadastral values are relatively lower for more expensive housing units. I develop a life-cycle model with endogenous homeownership to assess the effects of reforming the current system. My findings show that removing the owner-occupied exemption and adjusting cadastral values to market values increases government property tax revenues as a percentage of GDP by over 0.8 percentage points but also increases homeownership rates by 1.2 percentage points. The increase in homeownership results from lower property tax rates on smaller houses. Finally, I show that in the short run, the reform increases the welfare of young households but lowers the welfare of older ones. In the long run, welfare increases for new generations. Higher welfare is mainly due to the decrease in house prices in equilibrium. |
| Keywords: | Property taxes and assessment, housing markets, homeownership, wealth accumulation and bequests. |
| JEL: | D15 H24 H31 R21 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2024_2404&r=pbe |
| By: | S. Nobili |
| Abstract: | Over the past few decades, there has been a notable increase in firms' market power accompanied by a global decrease in Corporate Income Tax (CIT) rates. This paper provides a theoretical framework to shed light on these diverging trends. I develop a general equilibrium model that incorporates imperfect competition and strategic interaction among firms, allowing them to shift profits abroad towards a tax haven. I find that increasing firms' market power enhances their incentives to engage in profit shifting, via larger profits. Profits rise through (i) larger markdowns and (ii) reallocation of market share towards more productive firms. A government, competing to retain firms' profits, set low tax rates to prevent local firms from evading toward tax haven(s). The competition is stronger, i.e. lower tax rates, when firms' market power is higher. Besides, I find that profit shifting widens the disparities among ex-ante heterogeneous firms and endogenously increases the level of market power in the economy, favouring the most productive firms. |
| Keywords: | L13;H73;H25;F23;E61;D43 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:202406&r=pbe |
| By: | Joan E. Madia; Francesco Moscone; Asieh Hosseini Tabaghdehi; Jong-Chol An; Changkeun Lee |
| Abstract: | This study investigates the link between taxation and fertility in South Korea, focusing on the historical period surrounding the mid-70s tax reforms. The longstanding decline in fertility rates has been widely discussed in relation to factors such as increasing human capital, women’s employment, and rising housing costs, leading couples to postpone or forego childbearing decisions. However, less attention has been paid to how tax policies that influence disposable income and economic planning horizons could indirectly affect fertility choices. While taxation is crucial for funding social security systems, policies that reduce household resources without considering demographic impacts may have unintended consequences on population dynamics. Using a time-series of country-year from the World Bank, we exploit South Korea’s major mid-1970s tax reforms as a natural experiment to test the hypothesis that higher tax burdens also contributed to reducing fertility over the subsequent decades. The results suggest considerable negative effect of the mid-1970s tax reforms on fertility in South Korea. This macro-analysis shows tax policies can influence population dynamics, but lacks insight into how tax changes affected childbearing decisions at the household level. Future micro-level studies could reveal mechanisms linking tax policies and fertility behavior. Still, this study highlights potential demographic impacts of taxation policies. Policymakers should consider such consequences when modifying tax systems, especially policies related to family resources and child affordability. |
| Keywords: | Fertility, Taxation, Synthetic Control Method |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:fbk:wpaper:2024-02&r=pbe |
| By: | Nicola Comincioli; Paolo M. Panteghini; Sergio Vergalli; Paolo Panteghini |
| Abstract: | In this article we study start-up investments in developing countries. Using a representative firm, we wonder how relevant are the effects of taxation and risk on new business activities. It is worth noting that developing countries are usually characterized by three main characteristics. Firstly, a firm’s Earnings Before Interest and Taxes (EBIT) is likely to be more volatile than in developed jurisdictions. Secondly, firms in developing countries can be affected by a higher risk of expropriation. In particular, this may happen when early-stage businesses are supported by multinational companies. Thirdly, financial market show higher inefficiencies, compared to countries. Using a real-option approach, we study start-up investment decisions. We find that, although tax rates are usually higher than the developed countries’ ones, taxation has an almost negligible effect. If however a policy-maker aims at boosting new business activities it must decrease both EBIT volatility and the expropriation risk, as well as improving financial market efficiency. |
| Keywords: | real options, business taxation, default risk, developing countries, numerical simulations |
| JEL: | H25 G33 G38 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11014&r=pbe |
| By: | Asmae AQZZOUZ; Nathalie PICARD |
| Abstract: | This study examines the influence of local taxes on household migration behavior between French municipalities (“communes”). We consider five tenure status categories and four categories of household head age. Our findings partially support Tiebout "voting with feet" theory, especially among young flat renters in the private sector, flat owners and social housing renters. A surprising result is related to the introduction of the municipality size in the regression, which dramatically affects the coefficient measuring the effect of local tax rates on migration probability. This suggests that a large part of the “Tiebout effect” usually found in the literature is an artefact caused by the spurious correlation between municipality size and local tax rates. |
| Keywords: | Residential mobility, local taxes, local public expenditures, heterogeneity, local amenities, life cycle. |
| JEL: | H71 H72 R23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-12&r=pbe |
| By: | Shuichi Tsugawa |
| Abstract: | In this paper, we examine the optimal mixed taxation of polluting goods and subsidies for self-protection under nonlinear income tax. The novel contribution of this paper is that we take into account disaster risk, the probability of which is determined by the total amount of polluting goods consumed by all individuals. We derive the properties of optimal allocations in the first-best and second-best scenarios, and the tax wedges. Additionally, we obtain the optimal tax scheme in cases in which the government cannot observe each individual's consumption of polluting goods. The optimal tax rate on polluting goods includes the Pigouvian term and the screening term under asymmetric information, and the optimal subsidy rate on goods for self-protection is discriminatory, which reflects that screening term. Additionally, we consider public expenditure aimed at reducing losses incurred as a result of disasters, in addition to other fiscal policies in an asymmetric information setting, and find that the optimal level is determined by a modified Samuelson rule that includes the screening term between households. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:tcr:wpaper:e203&r=pbe |
| By: | Paul S. Willen |
| Abstract: | Rising rents, often attributed to a shortage of available housing, spotlight the urgent need to accelerate housing construction, particularly in Boston and other “superstar cities” where rents have been rising acutely. This report looks at the potential efficacy and costs of one particular policy option to jump-start residential construction: incentivizing developers to build by granting them tax abatements for new construction. |
| Keywords: | tax abatement; housing supply; Housing - Boston |
| JEL: | H20 |
| Date: | 2024–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:97983&r=pbe |
| By: | KONISHI Yoko; OGAWA Hikaru; IGEI Naoya; ITO Chiemi |
| Abstract: | Japan has a unique program called Furusato Nozei (tax payments to hometowns), which allows people to donate a portion of their taxes to their favorite municipalities in return for a gift. The program also provides a measure (called one-stop special measure) that allows donors to receive a tax deduction without filing a final tax return if they donate to five or fewer municipalities. This study verifies how this "limit constraint" measure, which sets a limit on the number of municipalities, affects donors' choices using the results of an original questionnaire survey on the use of the Furusato Nozei program in 2022. Clarifying the characteristics of donors by estimating a usage probability model, we examine the changes in donor behavior and the usage satisfaction for the program by donors facing the upper limit constraint. The analysis confirms that the limit constraint (1) suppresses the number of donation destinations and creates a clustering towards the upper limit level, (2) raises the donation amount per donation and decreases the number of municipalities receiving donations, and (3) leads to a decline in satisfaction with the program. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:24009&r=pbe |
| By: | Ghiglino, C.; Muller, A. |
| Abstract: | We provide a politico-economic theory of income redistribution with endogenous social identity of voters. Our analysis uncovers a non-monotonic relationship between market income inequality and redistributive taxation in line with the mixed evidence on the sign of their empirical relationship: taxation first increases with wage inequality as all voters identify with others, but then drops sharply as affluent voters switch to identify in-group. We further add ethnicity as an identification attribute. Consistent with existing empirical evidence, our model predicts that the presence of ethnic minorities and across ethnic group inequality reduce redistribution, while within ethnic group wage inequality increases it. |
| Keywords: | Inequality, Probabilistic Voting, Redistribution, Social Class, Social Identity, Tax Rate |
| JEL: | D64 D71 D72 H20 |
| Date: | 2023–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2320&r=pbe |
| By: | Carlos Madeira |
| Abstract: | Chile implemented large pension withdrawals during the Covid pandemic. Afterwards, Chile increased non-contributory benefits in a quasi-universal scheme. Simulating future pensions, I show that the average loss in contributory pension income is 27.9%, with losses of 23.9% and 31.4% for men and women, respectively. After accounting for public transfers, the average loss in total pension income is just 6.2%, with losses of 7.5% and 5.2% for men and women, respectively. Current retirees lost just 1.1% of their pension income after accounting for the government transfers. The state may end up covering 92% of the total value of the pension withdrawals through increased transfers. |
| Keywords: | pension wealth, Covid pandemic, fiscal costs |
| JEL: | D14 H55 O54 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1176&r=pbe |
| By: | Collewet, Marion; Fairley, Kim; Kessels, Roselinde; Knoef, Marike; van Vliet, Olaf |
| Abstract: | We study Dutch taxpayers’ preferences in designing a social welfare system. With help of a choice experiment we ask 2000 respondents to make choices between policy packages, characterized by different levels of income for welfare recipients, of obligations, of sanctions, of earnings and gifts disregards, and of taxes for the average Dutch household. The results show that respondents are in favor of relatively generous benefits and disregards, but also find monitoring and activation very important. Both self-interest and altruism, as well as trust in the government, appear to shape respondents' preferences. Respondents’ preferences line up with their voting behavior. |
| Date: | 2024–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:4am7e&r=pbe |
| By: | BORNUKOVA Kateryna (European Commission - JRC); HERNANDEZ MARTIN Adrian (European Commission - JRC); PICOS Fidel (European Commission - JRC) |
| Abstract: | The EU committed to meet the poverty reduction target set in the European Pillar of Social Rights Action Plan, which entails to reduce the number of children at risk of poverty or social exclusion by 5 million by 2030. The paper assesses the impact of child-contingent cash support in EU-27 in 2019-2022 on child poverty and inequality and sheds light on the role this kind of support plays, or could further play, when it comes to meeting the 2030 child poverty target. We use the microsimulation model EUROMOD to identify child-contingent cash support and find significant variation in average support per child across EU-27, ranging from 3.2% of GDP per capita in Ireland to 12% of GDP per capita in Austria. Correspondingly, the impact of child-contingent cash support on reducing child at-risk-of-poverty rates varies from 4 p.p. in Portugal to 16 p.p. in Slovakia. The inequality-reducing effect is highly correlated with poverty reduction. With rare exceptions, countries rely on child benefits as a primary source of child-contingent cash support, as opposed to tax-based support. Non-poor households receive over 50% of total child-contingent cash support in most EU countries. Means-tested benefits, while better targeted to impoverished households, do not always provide enough support to lift them above the poverty line. We do not observe correlation between child-contingent cash support, other benefits, and in-kind child support. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202402&r=pbe |