|
on Public Economics |
| By: | Kevin Grieco; Abou Bakarr Kamara; Niccolo F. Meriggi; Julian Michel; Prichard Wilson |
| Abstract: | Building durable fiscal capacity requires that states obtain compliance with their taxes - a persistent challenge for states with low enforcement capacity. One promising option for governments in weak states is to raise voluntary compliance by enhancing governmental legitimacy. This study reports results from a participatory budgeting policy experiment in Sierra Leone designed to increase legitimacy and tax compliance by inviting public par- ticipation in local policy decision-making. In phone-based town halls, participants shared policy preferences with neighbors and local politicians and then voted for public services that were subsequently implemented. We find that the intervention durably increased participants’ perceptions of government legitimacy. However, contrary to influential models of tax compliance, we report a robust null effect on tax compliance behavior. Participants’ partisan affiliation strongly conditions the treatments’ effects on tax compliance and attitudes toward paying taxes: We find large, positive impacts among copartisans of the incumbent government but significant negative impacts among non-copartisans. Our results highlight that the legitimacy gains of participatory interventions may not increase voluntary tax compliance when participation politicizes compliance. |
| Keywords: | fiscal capacity; participatory budgeting; taxation; legitimacy; state building |
| JEL: | H20 D72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:csa:wpaper:2025-05 |
| By: | Salim Ergene |
| Abstract: | This paper studies optimal government interventions to recapitalize corporations under tight financial conditions. The policymaker can finance the recapitalization program through income taxes and an inflation tax on money holdings. However, households operating the labor-intensive production technology can evade their tax obligations. Growing tax evasion raises the tendency to monetize interventions. Partially monetizing recapitalization yields welfare gains, as an inflation tax reallocates resources from less to more productive sectors. However, financing unproductive government spending through seigniorage revenue becomes an inferior policy, as contemporaneous inflation costs outweigh the expansionary effects of fiscal policy. Pecuniary externalities generate scope for macroprudential policies, mitigating the effects of financial shocks. |
| Keywords: | Tax evasion, Recapitalization, Currency mismatch, Depreciation |
| JEL: | E12 E41 E26 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2507 |
| By: | Blesse, Sebastian; Buhlmann, Florian; Heil, Philipp; Rostam-Afschar, Davud |
| Abstract: | We study firm responses to local policies through a survey experiment, providing randomized information on the competitiveness of business tax rates and highway access in their headquarters' municipality. Firms often misperceive local policy competitiveness, especially for tax rates. Investment decisions respond asymmetrically to tax competitiveness. Positive tax rank information reduces investment intentions in neighboring municipalities. Compared to this, negative tax news increase relocation plans. However, most firms receiving bad news plan to continue investing in their headquarters' municipality, indicating home bias. These effects are strongest for mobile firms and corporations. Negative infrastructure news lower location satisfaction but do not influence investment. |
| Keywords: | tax competition, infrastructure, firm location, survey experiment |
| JEL: | H25 H32 H71 H72 H73 L21 R38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319894 |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB) |
| Abstract: | We analyse whether decentralisation affects tax morale through both greater trust in institutions (the carrot) and greater perceived tax enforcement (the stick), two drivers of compliance that operate via the promotion of voluntary compliance and deterrence, respectively. We take advantage of the Spanish case characterised by a general regime, which is partially decentralised, and the so-called foral regime, operated in two regions, which is fully decentralised (i.e. high tax regulatory and administrative powers). We draw on data from a unique survey that are representative both of the national level and of the foral regions. Under the foral regime, the average citizen neither presents a higher level of tax morale, nor has the perception of a higher level of enforcement. Thus, any structuring of the tax administration within a federal system cannot be based on what are presumed to be higher levels of compliance resulting from the decentralisation of the administration. |
| Keywords: | Fiscal Federalism, Decentralisation, Tax Morale, Tax Compliance, Survey Data |
| JEL: | H11 H71 H77 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ieb:wpaper:doc2025-02 |
| By: | Giulia Aliprandi (EU Tax Observatory); Thijs Busschots (EU Tax Observatory); Carlos Oliveira (EU Tax Observatory) |
| Abstract: | This note examines the global prevalence and distribution of shell companies, which are often used for illicit financial activities like tax evasion. Using business registry data for over 200 jurisdictions, including individual US states, we construct an indicator of shell company prevalence based on the number of registered companies per capita. We find that known tax havens like the British Virgin Islands and the Cayman Islands have extremely high rates of company presence per adult. Zooming in on Europe reveals Estonia as a lesser-known host for shell companies, besides flagging known conduit countries like Luxembourg and Cyprus. A unique decomposition of US states also shows Delaware and Wyoming are potentially hosting a large number of shell companies. Indicative for the role of shell companies in international tax evasion, our shell company prevalence indicator correlates with jurisdiction characteristics catering tax evasion, such as low corporate tax rate and aggressive tax treaties. |
| Keywords: | Shell companies, tax evasion, business registries |
| JEL: | H26 K34 F38 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:plnote:009 |
| By: | Giulia Aliprandi (EU Tax Observatory) |
| Abstract: | The Australian government is implementing a new public Country-by-Country Reporting (CbCR) regime to enhance tax transparency for large multinational enterprises. This note analyzes the key aspects of the Australian Public CbCR legislation, how it compares to other reporting standards, its potential impact, and blind spots. The analysis reveals that while the Australian Public CbCR legislation aligns with global trends and initiatives, there are mismatches in the requirements implemented across different countries, which may leave gaps in transparency. To maximize effectiveness, there is a need to align with the best global transparency practices and avoid creating new loopholes. The note estimates that approximately 50% of large US companies and a significant portion of multinationals from countries like China, Japan, and Germany will potentially have to disclose information on their tax haven presence. However, some key tax havens are missing from the draft list of countries required for disaggregated reporting. Australia should not rely on the EU CbCR directive to improve transparency on European tax havens but include them in the list of countries to be disclosed. |
| Keywords: | Public CbCR, tax transparency, multinational enterprises |
| JEL: | H26 F23 M48 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:plnote:012 |
| By: | Laurence Jacquet; Stéphane ROBIN (CY Cergy Paris Université, THEMA) |
| Abstract: | We re-examine the R&D - innovation - productivity nexus in 8 EU countries in the context of a possible EU-wide "super deduction" on R&D expenditures, using panels of industries with a long time dimension. We introduce dynamics in the innovation production function and extended production function models, taking the availability/unavailability of R&D tax credits (R&DTC) into account. Our benchmark estimates, obtained with panel ARDL models, yield positive longrun elasticities of innovation and productivity with respect to R&D intensity. R&D conducted under an R&DTC either reinforces an already-existing positive elasticity or makes it significantly positive if it was not before. Disentangling the respective effects of ’pure’ business R&D and of government-supported R&D reveals a wider diversity of situations, however. The effect of R&DTC is less often significant, sometimes superseded by other forms of public support to R&D. The main policy implication of these results is that a harmonized "super-deduction" on R&D at the EU level may be slightly premature. Complementary analyses suggest that targeting specific industries may make such a policy more effective and accurate. |
| Keywords: | Innovation, Productivity, Dynamic Panel Data Models, Public Support to R&D, European Science and Technology Policy |
| JEL: | O30 O38 H25 H54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2025-09 |
| By: | Altug Aydemir; Cem Cebi |
| Abstract: | This study aims at forecasting the future behavior of budget variables, using Artificial Neural Network (ANN) and Deep Neural Network (DNN) techniques for Türkiye. Particularly, we focus on budget expenditures, tax revenues and their main components. Annual data were used and divided into two sub-periods: a training set (2002-2019) and a test set (2020-2022). Each fiscal item is estimated using relevant explanatory variables selected based on economic theory. We achieved good forecasting performance for main budget items using ANN and DNN methodologies. We found that most of the Mean Absolute Error (MAE) values fell within the acceptable range, an indicator of good prediction performance. Second, we see that the MAE values for public expenditures are lower than taxes. Third, estimating total tax revenues (aggregate data) performs better compared to subcomponents of taxes (disaggregated data). The opposite is the case for public expenditures. |
| Keywords: | Machine Learning, Deep Learning, Artificial Neural Network (ANN), Deep Neural Network (DNN), Budget Forecast, Government Spending, Tax Revenue |
| JEL: | C53 H20 H50 H68 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2509 |
| By: | Alves, Cassiano Breno Machado; Costa, Carlos Eugênio da; Lobel, Felipe; Alves, Katia Aiko Nishiyama |
| Abstract: | Starting with an optimal income-splitting household tax schedule we assess the impact of gender-specific subsidies. Motivated by evidence that spouses’ relative earnings influence their power, we let bargaining weights respond to this subsidy, and household labor supply choices vary in turn with weights. Quantitative exploration reveals that a subsidy on women’s earnings is welfare-improving, but that neglecting the empowering effect of subsidies greatly underestimates those gains.In our baseline assessment, 99.6% of all women benefit from the policy. For 78% of women, welfare gains are no smaller than 5%, and for 15%, gains exceed 10%. The optimal subsidy for women is about 16% while the benchmark of models where the power channel is neglected is close to 0% with trivial average gains. We find that it is women in the most productive households who benefit the most from this policy. |
| Date: | 2025–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:fgv:epgewp:848 |
| By: | Hernán Vallejo (Universidad de los Andes) |
| Abstract: | This article presents a simplified model to compile and synthesize in a formal - and hopefully clear- way, some of the most important trade policy results of the literature, in what can be thought of as a Fundamental Theorem of Trade Policy. It shows that ceteris paribus, when other externalities and other distortions are not considered, optimal import tariffs and optimal taxes on exports are: positive for large countries; “beggar thy neighbor” and “beggar thy world” policies when applied by a large country; and examples of a dominant strategy for each large country, a Nash Equilibrium in trade policy and a Prisoner´s Dilemma, when applied simultaneously by several large countries. Import and export subsidies are shown to be “beggar thyself”, “benefit thy neighbor”, and “beggar thy world” policies. Optimal import tariffs and export taxes are zero for small countries. Consequently, retaliation by small countries when large countries use tariffs and/or export taxes exacerbates their own welfare losses. Enforceable and verifiable commitment technologies, through a multilateral institution such as a credible WTO, are required to avoid undesired outcomes. |
| Keywords: | Optimal Tariff, Optimal Export Tax, Beggar Thyself, Beggar Thy Neighbor, Benefit Thy Neighbor, Begga |
| JEL: | F13 F15 |
| Date: | 2025–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021406 |