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on Public Economics |
| By: | Daniel Overbeck; Eliya Lungu |
| Abstract: | This paper shows that bargaining over tax payments is an important feature of tax compliance and enforcement in lower income countries. Analyzing the universe of administrative tax filings from Zambia, we document sharp bunching in (i) dominated regions above tax schedule discontinuities, inconsistent with standard models of tax compliance and (ii) at round number tax payments, implying that certain payments are being targeted. Additional evidence from our own survey suggests that discussing tax payments with tax officials before filing taxes is widespread, in line with tax payments being the outcomes of bargaining. Such bargaining over taxes is consistent with fact (ii), as bargaining outcomes are often round and salient numbers, and with fact (i), because tax schedule discontinuities restrict the set of feasible bargaining outcomes. Finally, we generalize the conventional Allingham & Sandmo (1972) model to allow for bargaining as a mode of tax compliance. We show that bargaining leads to Pareto-improvements for both taxpayers and the state as long as state capacity is sufficiently low. |
| Keywords: | taxation, bargaining, development, small-and medium enterprises, tax compliance, Zambia |
| JEL: | H20 O17 D73 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12172 |
| By: | Becker, Johannes |
| JEL: | H25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325467 |
| By: | Pfeil, Katharina; Kasper, Matthias; Necker, Sarah; Feld, Lars P. |
| Abstract: | We study how individuals adjust their labor supply in response to tax reforms that alter income tax progressivity. In an online experiment with 522 participants, we compare responses to reforms that replace a progressive tax system with a flat tax and vice versa. We find asymmetric effects: labor supply increases when a progressive regime is replaced by a flat tax system, but does not decline when progressivity is introduced. This increase in labor provision occurs only when the reform lowers the marginal tax rate, not when it raises it. Our results suggest that labor supply responses to tax reforms are nuanced and path-dependent: reforms change behavior when they ease tax burdens for individuals who were previously discouraged from working more due to progressive thresholds. |
| Keywords: | Tax System Design, Tax Reform, Notches, Labor Supply, Online Experiment |
| JEL: | J20 J22 H24 H30 C91 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:aluord:327115 |
| By: | Subhayu Bandyopadhyay; Sugata Marjit; Santiago Pinto; Marcel Thum |
| Abstract: | We investigate the trade-off policymakers face between raising tax revenues for public good provision and mitigating the distortionary effects of taxation when individuals can evade taxes and allocate work hours between legal and clandestine (illicit) activities. These distortions lower the constrained optimal tax rate and result in the under-provision of the public good. This under-provision problem is mitigated when surplus from the audit agency is seamlessly transferred to the taxing authorities. Extensions of the basic model incorporate agent heterogeneity and a more general specification of the concealment cost function for infringements. |
| Keywords: | Taxation; evasion; compliance; legal and illicit activities; public goods; externalities |
| JEL: | H40 K10 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101772 |
| By: | Jean Hindriks (CORE (LIDAM) and Economics School of Louvain, Université catholique de Louvain, Louvain-la-Neuve, Belgium); Yukihiro Nishimura (Osaka University) |
| Abstract: | New technologies and the globalization of the economy have facilitated tax avoidance through the shifting of profits by multinational enterprises (MNEs) to low-tax jurisdictions. We develop a three-country asymmetric tax competition model where, in addition to the conventional profit shifting to the tax haven, the high- and low-tax member (of an economic union) countries encourage MNEs to shift resources through the shifting of production activities and employment (activity shifting). We examine how the relative proportions of profit vs activity shifting are determined in the noncooperative equilibrium. We also examine the implications of the Global Minimum Tax (GMT). |
| Keywords: | Profit shifting; Tax competition; Tax enforcement; |
| JEL: | C72 F23 F68 H25 H87 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2513 |
| By: | Wozny, Florian |
| JEL: | H22 L13 Q52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325370 |
| By: | Arnemann, Laura; Doerrenberg, Philipp; Eble, Fabian; Rostam-Afschar, Davud; Voget, Johannes; Buhlmann, Florian; Karlsson, Christopher |
| Abstract: | Motivated by the increasing frequency with which business leaders publicly express their views on policy issues and by recent findings on the role of narratives in shaping preferences and behaviors, we investigate ow narratives affect the tax preferences of firm decision-makers. Specifically, using a large-scale survey experiment (N=7, 848), we examine how exposure to narratives of redistribution and fiscal consolidation affects firm decision-makers' attitudes toward taxes and fiscal stimulus. We find that framing taxes as payments of due debts increases the preference to pay taxes, whereas framing taxes as funds required to cover undue losses is largely ineffective, except for a notable tendency to favor raising the capital gains tax. We also observe a greater preference to pay taxes when decision-makers agree with the stimulus. Our findings on narratives and the channels affecting tax preferences have implications for fiscal policy communication |
| Keywords: | Tax Preferences, Fiscal Policy, Firm Decision-Makers, Survey Experiments |
| JEL: | H21 H24 H25 H12 H32 H60 D6 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:327101 |
| By: | Sanjeev Gupta (Center for Global Development); João Tovar Jalles (University of Lisbon-Lisbon School of Economics and Management (ISEG); Universidade de LisboaISEG; Universidade Nova de Lisboa-Nova School of Business and Economics IPAG Business School); Ainhoa Petri-Hidalgo (Center for Global Development) |
| Abstract: | Noncommunicable diseases—driven by tobacco use, harmful alcohol consumption, and high-sugar diets—account for over 70 percent of global deaths and impose annual economic losses exceeding US $514 billion. Excise taxes on these health-harming products offer a dual benefit of reducing consumption and raising public revenue, yet performance varies widely across countries. This paper applies stochastic frontier analysis to a global panel of 97 IMF member states to estimate maximal feasible excise tax performance for tobacco, beer, spirits, and sugar-sweetened beverages (SSBs), conditioning on GDP per capita, consumption patterns, demographics, and governance indicators. Given data availability, we estimate a revenue-based frontier for tobacco and rate-based frontiers (expressed as a share of retail price) for alcohol and SSBs. Tax-effort scores reveal that countries collect on average just 0.4 percent of GDP in tobacco excise revenue—despite a feasible capacity of 1.5 percent—indicating an untapped fiscal gap of 1.1 percent of GDP. For beer, spirits, and SSBs, countries apply only 35 percent, 25 percent, and 15 percent, respectively, of their feasible excise rates. We introduce a four-quadrant diagnostic framework to classify countries by tax collection and effort and identify tailored policy responses. These findings have major implications for health financing, fiscal reform, and technical assistance, particularly in low- and middle-income countries. |
| Keywords: | sin taxes, stochastic frontier analysis, tax capacity, excise revenue, health-tax efficiency |
| JEL: | H2 I1 H71 D61 C23 |
| Date: | 2025–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:727 |
| By: | Neumeier, Florian; Gstrein, David; Peichl, Andreas; Zamorski, Pascal |
| JEL: | H22 H25 H71 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325380 |
| By: | Bruckmeier, Kerstin; Dolls, Mathias; Necker, Sarah; Peichl, Andreas; Windsteiger, Lisa |
| JEL: | J22 J46 J48 H26 H31 H53 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325413 |
| By: | Yang Zhang (University of Macau); Ziang Qiu (University of Macau); Donghyun Park (Asian Development Bank); Shu Tian (a) |
| Abstract: | The intricate relationship between wealth redistribution policies and entrepreneurial vitality has long captivated the attention of economists and policymakers. Drawing on data from the Global Entrepreneurship Monitor (GEM) and manually collected information on inheritance taxation policy reforms across a diverse panel of 55 countries from 2000 to 2023, this study uses a staggered difference-in-differences model to examine how the changing rules for wealth transfer taxation influence entrepreneurial activity. Our results show that higher inheritance tax rates are associated with elevated entrepreneurial index scores and that rising inheritance taxes correlate with increases in the entrepreneurial index, while tax cuts correspond to declines. This finding is robust to alternative measures of key constructs and identification strategies. Our results offer valuable insights into how inheritance tax policies influence entrepreneurial behavior, providing essential guidance for policymakers and economists aiming to comprehend the intricate dynamics of wealth transfer and entrepreneurship on a global scale. |
| Keywords: | inheritance tax;entrepreneurship;cross-country;difference-in-differences |
| JEL: | L26 H24 |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021559 |
| By: | WU, Da-Kai; Ko, Yi-Chun |
| Abstract: | This paper evaluates the lasting impact of India's 2016 demonetization on tax collection. Using the synthetic control method and cross-country panel data from 2005-2022, we find a statistically significant and persistent increase in sales and production tax revenues, but no comparable change in income and profits tax collections. Mechanism tests suggest that cash usage fell and digital payments rose during 2016 and 2017, but both returned to pre-demonetization levels from 2018 onward. The size of the informal economy remained unchanged. These findings cast doubt on demonetization's effectiveness as a tool for broadening the tax base and reducing informality. The sustained rise in indirect tax revenues is more plausibly attributable to concurrent structural reforms, particularly the Goods and Services Tax, rather than to demonetization itself. By distinguishing between short-term payment disruptions and long-term revenue effects, this study provides new evidence on the limits of one-off policy shocks in achieving lasting tax compliance. |
| Keywords: | JEL classfication: E02, H26, O23, India demonetization, tax collection, tax compliance, digital payment, synthetic control method |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:agi:wpaper:02000250 |
| By: | Bierbrauer, Felix; Boyer, Pierre; Peichl, Andreas; Weishaar, Daniel |
| JEL: | C72 D72 D82 H21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325406 |
| By: | Naiyue CUI; Minchung HSU; Yunfang HU |
| Abstract: | This study extends Hansen and Imrohoroglu (2016) by incorporating female labor supply and a home sector into a growth model to assess Japan’s fiscal sustainability and quantify the role of female labor in stabilizing government debt. The model is calibrated to the Japanese economy, which features a sizable gender productivity gap in the market sector, with female labor efficiency below 50% of the male level. Absent policy intervention, model simulations project the debt-to-output ratio to exceed 250% by 2035. Stabilizing debt at 60% of output using the consumption tax alone requires raising the tax rate to 40.9% starting in 2035, followed by a reduction to 24.4% once the target is achieved in 2089. We also find that reforming Japan’s current spousal tax treatment is critical. Removing the current spousal tax treatment together with the debt stabilization improves female labor supply and reduces the required consumption tax rate to 33.9% during 2035–2089 and to 18.2% at the target. Additional simulations likewise highlight the importance of gender equality for labor supply and long-run fiscal outcomes. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25095 |
| By: | Pierre Courtioux (DVHE - De Vinci Higher Education, DVRC - De Vinci Research Center - DVHE - De Vinci Higher Education, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); François Métivier (IPG Paris - Institut de Physique du Globe de Paris) |
| Abstract: | Based on a microsimulation analysis over the period 2009-2019, this note presents the results of different scenarios for making the French R&D tax credit (CIR - Crédit Impôt Recherche) conditional on a diviend payment criterion. It shows that 27% of companies declaring R&D expenditure for the CIR in a given year pay dividends to their shareholders. Furthermore, 14% of companies declaring R&D expenditure eligible for the CIR increased their dividends payments in the same year. Depending on the scenario adopted, the introduction of a condition on the non-payment of dividends or the absence of an increase in payments could yield between 1 and 2.1 billion euros (i.e. between 16 and 36% of the total annual R&D tax credit claim). |
| Abstract: | Sur la base d'un exercice de microsimulation sur la période 2009-2019, cette note présente les résultats de différents scénarios de conditionnalité du crédit impôt recherche (CIR) à un critère de versement de dividendes. Elle montre que 27% des entreprises déclarant des dépenses de R&D au CIR une année donnée versent des dividendes à leurs actionnaires. Par ailleurs, 14% des entreprises déclarant des dépenses de R&D au CIR ont augmenté leurs dividendes la même année. Selon le scénario retenu, l'introduction d'une conditionnalité du CIR au non-versement de dividende ou à l'absence d'augmentation des versements pourrait rapporter entre 1 et 2, 1 milliards (c'est-à-dire entre 16 et 36% de la créance totale annuelle). |
| Keywords: | France, microsimulation, dividend, R&D tax credit, dividendes, crédit impôt recherche |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:halshs-05271781 |
| By: | Matthew Gudgeon; Pablo Guzman-Pinto; Johannes Schmieder; Simon Trenkle; Han Ye |
| Abstract: | We show that the non-employment effects of unemployment insurance (UI) for older workers depend critically on retirement policy. Using German data, we document large bunching in UI inflows at the age that allows workers to claim their pension following UI expiration. Inflows respond strongly to several UI and pension reforms. We probe the implications of these behavioral responses using a dynamic model and find that Germany’s UI and retirement policy changes had substantial effects on the unemployment rate of older workers. Furthermore, we calculate large fiscal externalities from extending UI for older workers, especially under generous retirement policies. |
| Keywords: | Unemployment insurance, moral hazard, retirement, older workers, interactions |
| JEL: | J26 J64 J65 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_481v2 |