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on Public Economics |
| By: | Mr. Shafik Hebous; Mr. Cory Hillier; Andualem Mengistu |
| Abstract: | Pillar Two rules of the Inclusive Framework agreement on a minimum corporate tax (known as ‘Global Anti-Base Erosion Rules’, for short GloBE) have important implications for the design of the corporate income tax. This chapter discusses these implications particularly from the perspective of low-tax jurisdictions. It argues that it is not possible to design a system that always guarantees generating exactly the bare minimum tax intended by the rules and motivates that this should not be the policy objective anyway. Importantly, if no profit tax already exists, countries need to consider whether to adopt one, and if yes, in what form. There is a case for introducing a general profit tax beyond the GloBE rules, together with a qualifying GloBE domestic minimum top-up tax as a backstop. The familiar alternatives of efficient economic rent tax designs, however, are no longer equivalent under the GloBE. In practice, given the specifics of the rules, an efficient rent tax on in-scope multinationals cannot be combined with a statutory tax rate below a certain cutoff, because the minimum tax becomes always binding. Under the GloBE, immediate expensing particularly maintains the time-value of fully deducting the cost of investment, without impacting the GloBE effective tax rate. |
| Keywords: | Investment; Minimum Tax; Tax Competition; Rent Taxation; Cash-Flow Tax; International Taxation |
| Date: | 2024–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/064&r=pbe |
| By: | Niels Johannesen |
| Abstract: | Offshore tax havens cause large losses of government revenue by facilitating tax evasion by wealthy individuals. This paper focuses on offshore tax evasion in developing countries and documents two empirical regularities. First, there is no clear development gradient in the exposure to offshore tax havens: a range of indicators suggests that wealth held in offshore tax havens, measured relative to the size of the economy, correlates only weakly with economic development. |
| Keywords: | Tax evasion, Tax havens, Offshore financial centres |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-15&r=pbe |
| By: | Martin B. Holm (University of Oslo); Rustam Jamilov (University of Oxford); Marek Jasinski (Statistics Norway); Plamen Nenov (Norges Bank) |
| Abstract: | This paper studies the spending response to news about a dividend tax reform in order to estimate the elasticity of intertemporal substitution (EIS). The Norwegian dividend tax reform was proposed in 2003, announced in 2004, implemented in 2006, and raised the dividend tax rate by 28 percentage points. We compare the spending responses of exposed households with a high share of dividends to income before the reform to a control group. Exposed households responded to the reform by increasing spending after the news and reducing spending after implementation. We interpret our findings using a capitalist-worker framework with dividend tax news shocks. The model can replicate the spending response to the dividend tax news only if the EIS is greater than one, with a baseline estimate of around 2. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2415&r=pbe |
| By: | Montserrat Botey; Guillaume Chapelle (Université de Cergy-Pontoise, THEMA) |
| Abstract: | The dramatic rise in wealth inequalities has generated debates on the oppor- tunity to tax wealth (Piketty, 2014; Garbinti et al., 2017). Increasing housing prices are, to a great extent, driving these widening wealth disparities. This paper examines the potential redistributive impact of taxing imputed rents, which usually are exempt from income taxation. We estimate tax savings and their distribution between households in France by using a fiscal simulator that Landais et al. (2011) developed. We find that while net imputed rents represent 7% of national net income, their nontaxation amounts to hidden fiscal spending (i.e., tax expenditures) totaling up to 11 billion euros annually. This indicates that nontaxation is the largest public spending directed at homeowners, bene- fiting mostly the oldest and wealthiest households. Replacing the property tax with imputed rent taxation could favor the youngest and poorest households, who went through a steady decline in their homeownership rates over the past few decades. |
| Keywords: | Housing, Wealth, Imputed Rents, Taxation , Inequalities |
| JEL: | H23 R38 D31 I31 I32 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2023-21&r=pbe |
| By: | Kosonen, Tuomas; Jysmä, Sami; Savolainen, Riikka |
| Abstract: | This paper studies the relationship between substitutability of taxed and nontaxed goods and the price elasticity of demand. We organize the paper through a simple model that yields as a result a highly convex relationship between the demand elasticity and how close non-taxed substitutes are available. Empirically we analyze a Finnish sin tax scheme for sweets, soda and ice cream providing us with quasi-experimental variation through multiple reforms. We have product and storelevel data on sales and prices containing hundreds of millions of observations. We also develop survey evidence on substitution preferences across categories of goods. Our estimated consumption elasticity is close to zero for sweets and ice cream that have intermediate non-taxed substitute: cookies. In a stark contrast, when the tax rate was doubled for sugary soft drinks but not for their close substitute non-sugary soft drinks, consumption elasticity is close to unity. These estimates align well with our theory framework wherein even with intermediate non-taxed substitutes available the demand elasticity is close to zero, while it is close to unity when very close substitutes are available. We also provide evidence that the quasiexperimental price elasticity estimates in the previous literature align with our theory framework. |
| Keywords: | excise taxes, sin tax, consumption, substitution, sweets, soda, Social security, taxation and inequality, H2, I18, fi=Verotus|sv=Beskattning|en=Taxation|, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:164&r=pbe |
| By: | Grieco, Kevin |
| Abstract: | How should governments in sub-Saharan Africa boost their own-source revenue? In this research note I explore the decision of policymakers to expand property taxation into rural areas in the context of developing countries. A policymaker weighing the costs and benefits of rural taxation must first consider the potential net revenue that can be extracted from rural areas. Ultimately, this is an empirical question that requires reliable data on the costs and potential revenue associated with rural taxation. Unfortunately, little such reliable data exists. In this project, I seek to fill this gap by measuring village-level costs and potential revenue associated with property taxation in Kono District in rural Sierra Leone. Based on a set of simulations, I find that property tax in poor, sparsely-populated rural areas can generate positive net revenue. While these gains are modest, they can provide a meaningful source of local government revenue in a context where incomes are near the bottom of the global distribution, and where there are potentially large returns to government spending. These simulations also highlight several features of rural tax collection. First, to increase net revenue, policymakers should prioritise increasing compliance over reducing collection costs. Second, I show that much of the revenue generated from rural taxation is likely to come from a small subset of the total villages. Third, I highlight several trade-offs between salary-based and pay-for-performance (PFP) models of tax collector compensation. I conclude by situating these results in policymakers’ broader calculus for taxing rural areas. |
| Keywords: | Finance, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18281&r=pbe |
| By: | Zrinka Lukač (Faculty of Economics and Business, University of Zagreb); Krunoslav Puljić (Faculty of Economics and Business, University of Zagreb); Vedran Kojić (Faculty of Economics and Business, University of Zagreb) |
| Abstract: | Optimal taxation and profit maximization are two very important problems, naturally related to one another since companies striving operates given tax system. However, in the literature these two problems are usually considered separately, either by studying optimal taxation or by studying profit maximization. This paper tries links the two problems together by formulating a bilevel model in which government acts as a leader and profit maximizing follower act as a follower. The exact form of the tax revenue function as well as optimal tax amount and optimal input levels are derived in cases when returns of scale take on values 0.5, 1 and 2. Several numerical examples and accompanying illustrations are given. |
| Keywords: | optimal taxation, government, profit maximization, monopolist, Cobb-Douglas production function, linear demand, bilevel programming |
| JEL: | C61 C72 D42 H21 |
| Date: | 2024–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:zag:wpaper:2401&r=pbe |
| By: | Nguyen, Hang T. T. |
| Abstract: | This paper presents an empirical analysis of the relationship between the corporate income tax (CIT) and the growth of total factor productivity (TFP) within European firms. Using data from the AMADEUS database over the 2005-2013 period, I measure the TFP of each firm using Wooldridge's (2009) methodology, alongside four alternative approaches introduced by Olley and Pakes (1996), Levinsohn and Petrin (2003), Ackerberg et al. (2015), and ordinary least squares (OLS) regression. The baseline investigation follows the TFP catch-up framework of Griffith et al. (2009). While my analysis corroborates prior findings indicating a negative relationship between CIT rates and the speed with which firms converge to the productivity frontier (productivity catch-up, Gemmell et al., 2018), it also uncovers a positive association between CIT rates and the average growth of productivity. Thus, the evidence reveals a non-linear relationship between corporate taxation and firms' productivity growth. Heterogeneity tests show that corporate income taxation is more relevant for the productivity growth of small-scale enterprises and domestic entities. These findings are robust to a variety of alternative specifications and tests. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:289456&r=pbe |
| By: | Arindam Misra |
| Abstract: | The Financial system has witnessed rapid technological changes. The rise of Bitcoin and other crypto assets based on Distributed Ledger Technology mark a fundamental change in the way people transact and transmit value over a decentralized network, spread across geographies. This has created regulatory and tax policy blind spots, as governments and tax administrations take time to understand and provide policy responses to this innovative, revolutionary, and fast-paced technology. Due to the breakneck speed of innovation in blockchain technology and advent of Decentralized Finance, Decentralized Autonomous Organizations and the Metaverse, it is unlikely that the policy interventions and guidance by regulatory authorities or tax administrations would be ahead or in sync with the pace of innovation. This paper tries to explain the principles on which crypto assets function, their underlying technology and relates them to the tax issues and taxable events which arise within this ecosystem. It also provides instances of tax and regulatory policy responses already in effect in various jurisdictions, including the recent changes in reporting standards by the FATF and the OECD. This paper tries to explain the rationale behind existing laws and policies and the challenges in their implementation. It also attempts to present a ballpark estimate of tax potential of this asset class and suggests creation of global public digital infrastructure that can address issues related to pseudonymity and extra-territoriality. The paper analyses both direct and indirect taxation issues related to crypto assets and discusses more recent aspects like proof-of-stake and maximal extractable value in greater detail. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.15074&r=pbe |
| By: | Emre Oral; Simon Rabaté; Arthur Seibold |
| Abstract: | We study the influence of family members, neighbors and coworkers on retirement behavior. To estimate causal retirement spillovers between individuals, we exploit a pension reform in the Netherlands that creates exogenous variation in peers’ retirement ages, and we use administrative data on the full Dutch population. We find large spillovers in couples, primarily due to women reacting to their husband’s retirement choices. Consistent with homophily in social interactions, the influence of the average sibling, neighbor and coworker is modest, but sizable spillovers emerge between similar individuals in these groups. Additional evidence suggests both leisure complementarities and the transmission of social norms as mechanisms behind retirement spillovers. Our findings imply that pension reforms have a large social multiplier, amplifying their overall impact on retirement behavior by 40%. |
| Keywords: | retirement, pension reform, social networks, spillover, peer effects |
| JEL: | D91 H55 J26 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10999&r=pbe |
| By: | Stanislas T. M. D. C. Agossadou (FASEG/UAC - Faculté des Sciences Economiques et de Gestion (FASEG) de l'Université d'Abomey-Calavi (UAC)) |
| Abstract: | This research consists of verifying whether CIT has an effect on capital given the financing risk incurred. A review of several capital theories has shown that CIT is one of the main determinants of a firm's capital structure. The inclusion of CIT in capital structure models continues to divide the world of corporate finance. Debt interest deduction in computing CIT reinforces the controversy over the question of the capital structure that optimizes the tax savings provided by this deduction. The consequence is the existence of two opposing groups on the optimum capital structure: on the one hand, the group of those who believe that there is one and only one optimal capital structure, and on the other, the group of those who reject out of hand any possibility of an optimal capital structure. The sample starts with a case study of two hypothetical identical firms, one indebted and the other non- indebted, with the same profitable investment project over a period of time, and ends with 101 pairs of identical firms belonging to different classes of financing risk. The hypothesis of non-gratuity of cost and income is used, and capital markets are assumed to be pure and perfect. The results confirm that CIT has no effect on the structure, value, cost and return of capital for a given financing risk, and reveal the existence of a third source of financing called "public capital", whose cost is the corporate capital tax rate (CCTR). There is no longer any question of thinking about the optimum capital structure, which is a pure financial illusion. This paper is one of the first to show that CIT does not affect capital, and to propose a model that explains capital structure behavior in the presence of CIT. |
| Abstract: | Cette recherche consiste à vérifier si l'IS a un effet sur le capital compte tenu du risque de financement encouru. L'examen de plusieurs théories de capital a montré que l'IS est l'un des principaux déterminants de la structure de capital de la firme. La prise en compte de l'IS dans les modèles de détermination de la structure de capital continue de diviser le monde de la finance d'entreprise. La déduction des intérêts de la dette dans le calcul de l'IS, renforce la controverse sur la question de la structure de capital permettant d'optimiser l'économie fiscale procurée par cette déduction. La conséquence est l'existence de deux groupes opposés sur l'optimum de la structure de capital : d'un côté, le groupe de ceux qui pensent qu'il existe une et une seule structure optimale de capital, de l'autre, le groupe de ceux qui rejettent d'emblée toute possibilité d'une structure optimale de capital. L'échantillon part de l'étude de cas de deux firmes identiques hypothétiques, l'une est endetté et, l'autre, est non endetté, ayant le même projet d'investissement rentable sur une période, pour aboutir sur 101 couples de firmes identiques appartenant à des classes différentes de risque de financement. L'hypothèse de non-gratuité de coût et de revenu est utilisée et les marchés de capitaux sont supposés purs et parfaits. Les résultats confirment que l'IS n'a aucun effet sur la structure, la valeur, le coût et le rendement de capital pour un risque de financement donné et ont révélé l'existence d'une troisième source de financement appelée « capital public » dont le coût est le taux de l'impôt sur le capital des sociétés (CCTR). Il n'est plus question de penser à l'optimum de la structure de capital qui, constitue une pure illusion financière. Ce papier est l'un des premiers à montrer que l'IS n'a pas d'effet sur le capital et à proposer un modèle qui explique le comportement de la structure de capital en présence d'IS. |
| Keywords: | Capital structure; firm value; weighted average cost of capital (WACC); return on investment; financial integration of corporate tax., Capital structure, firm value, weighted average cost of capital (WACC), return on investment, financial integration of corporate tax. |
| Date: | 2024–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04509016&r=pbe |
| By: | Yoko Ibuka (Faculty of Economics, Keio University); Junya Hamaaki (Faculty of Economics, Hosei University) |
| Abstract: | Studies suggest that mortality increases after income receipt. To examine whether the adverse effect of income on health is induced by economic activities and how certain economic activities are related to specific health conditions, we investigate withinmonth cycles in ambulance transport, utilizing detailed information on the locations of the origin and timing of the transports. Our analysis exploits the difference in the number of patients on the same day between payment and non-payment months, using the Japanese National Pension for the elderly that is distributed bi-monthly. We observe a 4.5% increase in ambulance transports on the day of pension payment, primarily attributed to heightened economic activities such as gambling or amusement, shopping, and dining out. We have suggestive evidence indicating that this increase in transport is linked to a relaxation in liquidity. These findings have implications for healthcare system preparedness and the optimal design of public benefit payment. |
| Keywords: | Emergency Medical Services, Social Security Payment, Time Stamp, Excess sensitivity |
| JEL: | H55 H75 I12 |
| Date: | 2024–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:keo:dpaper:2024-006&r=pbe |
| By: | Benjamin Bittschi (WIFO); Thomas Horvath; Helmut Mahringer (WIFO); Christine Mayrhuber (WIFO); Martin Spielauer (WIFO); Philipp Warum (WIFO) |
| Abstract: | The aim of this study is to assess the impact of the ongoing harmonisation of the retirement age for women with that for men on women's labour supply in Austria. According to the current legal framework, the standard retirement age for women will be gradually raised from 60 to 65 years from 2024 onwards, with the retirement age being raised by 6 months each year. The impact of the pension reform on women's labour supply is quantified using the dynamic microsimulation model microDEMS. This model integrates demographic changes in line with official population projections and detailed labour market modelling. According to our projections, the labour supply of women aged 60 to 64 increases by 87, 000 in 2040 compared to a scenario in which the retirement age remains unchanged. We compare our results with two alternative approaches: the more stylised microWELT simulation model and a purely data-driven approach. While all methods produce very similar results in the long run, the detailed modelling in microDEMS provides more plausible results during the transition period when the reform is gradually implemented. This is because it allows for a realistic representation of pension paths, taking into account all relevant pension types and the corresponding eligibility criteria, such as sufficient accumulated insurance periods. In contrast to a purely data-driven approach, microDEMS modelling also has the advantage of explicitly representing and quantifying the components of the change in labour supply. |
| Keywords: | Dynamic microsimulation, Pension reform, Labour force participation |
| Date: | 2024–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2024:i:673&r=pbe |
| By: | Lehner, Lukas (University of Oxford); Parolin, Zachary (Bocconi University); Wilmers, Nathan (MIT) |
| Abstract: | From 2010 to 2019, personal earnings inequality declined in the United States (U.S.) for the first time in decades, yet household income inequality continued to increase. Discordance between trends in personal earnings inequality and household income inequality was greater than in any other decade in recent U.S. history. We introduce a framework to decompose differences in inequality trends. We find that 46% of the 2010-2019 discordance is due to the changing household composition of workers. Specifically, a larger share of young workers are living with their parents, thus combining low personal earnings with high household incomes. The remaining 54% of discordance stems from inequality-increasing shifts in non-labor income (private income, taxes, and transfers). Despite the rare decline in U.S. earnings inequality, household income inequality increased due to changes in workers' household composition, increases in private income among higher-earning households, and the declining redistributive effect of government income transfers. |
| Keywords: | earnings inequality, income inequality, household composition, secondary earners, government transfers |
| JEL: | D31 E01 H24 I38 J31 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16874&r=pbe |