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on Public Economics |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Christos Kotsogiannis (Tax Administration Research Centre (TARC), University of Exeter Business School & CESIfo); Luca Salvadori (Universitat Autònoma de Barcelona & BSE & IEB & Tax Administration Research Centre (TARC), University of Exeter Business School) |
| Abstract: | Enforcing wealth tax compliance among high-net-worth individuals is particularly challenging. Using administrative data on the Net Wealth Tax for Catalan taxpayers over the 2011–2020 period, this paper evaluates the impact of audits on voluntary compliance. The evidence suggests that wealth tax audits do enhance compliance, but the impact is short-lived — and driven by taxpayers rebalancing their tax evasion and avoidance responses. On the institutional side, the results indicate that Spain’s overlapping tax audit mandates can create coordination frictions that reduce the efficiency and effectiveness of audit-based enforcement of the New Wealth Tax. Effective enforcement depends not only on robust audit strategies, but also on coherent institutional design and sound tax policy. |
| Keywords: | Tax Audit Evaluation; Overlapping Tax Audit Mandates; Wealth Tax; Tax Evasion; Tax Compliance |
| JEL: | H26 D31 O17 D02 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ieb:wpaper:doc2025-15 |
| By: | Guttorm Schjelderup; Floris Zoutman |
| Abstract: | This paper analyzes how a wealth tax affects investor portfolio choice when a realization-based capital gains tax is present. We develop a two-period model with heterogeneous investors and show that while a capital gains tax distorts portfolio choice by encouraging investors to postpone realization, a wealth tax can eliminate this distortion and enhance efficient portfolio choice. Our optimal-tax model balances the equity gains from both taxes against efficiency losses related to intertemporal and portfolio choice. We use the model to derive an elasticity-based criterion for empirically evaluating the desirability of a wealth tax. |
| Keywords: | wealth tax, capital-gains tax, dividend tax, lock-in effect, capital-market efficiency |
| JEL: | H24 D14 G51 H21 M21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12254 |
| By: | Alex Yeandle |
| Abstract: | The digitalization of low-income economies has made it easier for governments to collect tax, yet many still fail to raise adequate revenues. Why would policy makers in urgent need of resources not fully leverage these new tools? I argue that governments remain constrained by public opinion: digital taxes are perceived as unfair, unaccountable, and lacking tangible benefit among the large groups of voters they affect. As a result public support for digital taxes depends heavily on how they are designed. |
| Keywords: | Taxation, Fiscal policy, Low income countries, Mobile phones |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-81 |
| By: | Sofía Balladares (Universitat de Barcelona & IEB); Esteban García-Miralles (Banco de España) |
| Abstract: | Fiscal drag arises when nominal tax parameters remain unchanged despite nominal income growth, thereby increasing effective tax rates and revenue. We use Spanish administrative tax records and a detailed microsimulation model to examine fiscal drag in personal income taxation through two complementary approaches. First, we estimate tax-to-base elasticities to assess the progressivity of the tax system and potential fiscal drag under homogeneous income growth. We uncover significant heterogeneity in elasticities across income sources, across the individual income distribution and in the underlying mechanisms. Second, we conduct counterfactual simulations to quantify the actual impact of fiscal drag from 2019 to 2023, finding it accounts for about a third of revenue growth. Our findings offer insights for public finance modelling, revenue forecasting, and tax policy design. |
| Keywords: | Inflation, taxes, progressivity, indexation, bracket creep |
| JEL: | D31 E62 H24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ieb:wpaper:doc2025-08 |
| By: | Santiago Afonso; Sebastian Galiani |
| Abstract: | This paper examines the motives, constraints, and sequencing behind Argentina’s 2017 tax reform, drawing on the authors’ direct involvement in its design and implementation. We document how a large inherited fiscal imbalance, a disinflation program that mechanically raised real pension spending under the pre-existing indexation rule, minority status in Congress, and limited administrative capacity jointly narrowed the feasible policy set. Within those constraints, the reform aimed to be near-revenue-neutral while rebalancing the system toward investment and employment: phasing down corporate rates with dividend taxation and inflation adjustment, reducing the labor wedge at the bottom via a per-worker deduction, rationalizing VAT and excises (including carbon and health-motivated taxes), and coordinating with provinces to cap and de-cascade the turnover tax (ISIB) through a Fiscal Consensus. We trace how coalition politics and sectoral vetoes reshaped the package, why forward guidance and escape clauses were embedded ex ante, and how the 2018 sudden stop, followed by policy reversals, limited the reform’s realized growth dividend. We draw four lessons: credibility is a fiscal instrument; provincial coordination beats technocratic perfection; discretionary levers invite rent-seeking; and targeting informality and compliance margins yields higher returns than blunt rate changes. The analysis offers a pragmatic template for tax reform under macroeconomic fragility, federal fragmentation, and state-capacity constraints. |
| JEL: | H2 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34442 |
| By: | Bray, Sean; Bunn, Daniel; Gaul, Johannes; Spengel, Christoph |
| Abstract: | For the better part of the last decade, the global minimum tax, or Pillar Two, has dominated international tax policy discussions. Developing out of the Base Erosion and Profit Shifting (BEPS) Project at the Organisation for Economic Co-operation and Development (OECD), Pillar Two's main objective is to ensure that multinational enterprises (MNEs) with a consolidated group revenue of over EUR 750 million pay an effective tax rate of at least 15 percent in each jurisdiction where they earn profit. Some portion of the Pillar Two model rules have been adopted by several dozen countries around the world, but, importantly, not by other large economies such as the United States, India, or China. This especially puts European MNEs at a competitive disadvantage vis-àvis jurisdictions without a domestic minimum tax system. Our estimates show that the additional compliance costs for affected European MNEs amount to EUR 1.2 billion (up to EUR 2.0 billion) and total recurring costs amount to EUR 517 million p.a. (up to EUR 865 million p.a.). Due to the incentive for jurisdictions to implement a qualified domestic minimum top-up tax (QDMTT), Pillar Two leaves a geographic asymmetry. Additional tax revenues would predominantly accrue to low-tax jurisdictions, with hightax jurisdictions receiving little to no increase. At the same time, it is likely that MNEs expense compliance costs in the jurisdictions where they are headquartered, often high-tax jurisdictions. Furthermore, Pillar Two incentivizes jurisdictions to move from competition on tax rates to less transparent subsidies, which could also result in less disposable tax revenue. The combination of losing international competitiveness, increasing compliance costs for firms and tax authorities, and the lack of significantly more revenue is forcing some Member States to reconsider the policy altogether. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewpbs:331233 |
| By: | Geoffrey T. Sanzenbacher |
| Abstract: | The brief’s key findings are: (1) The Earned Income Tax Credit (EITC) encourages low-income people with kids to work – those without kids get a much smaller credit.(2) Previous EITC research has focused on younger households, but some analysts suggest an expanded childless credit could boost work among near retirees.(3) This study finds that raising the EITC by $1, 000 would produce a modest rise in employment among single women ages 55-64.(4) However, this impact is much smaller than that for younger single women, perhaps because older women have higher earnings or more health limitations.(5) Thus, an expanded EITC would primarily benefit younger workers, though with a positive side effect for at least some older workers too. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:crr:issbrf:ib2025-7 |
| By: | Alan J. Auerbach; William Gale |
| Abstract: | It is well-understood that the U.S. faces an unsustainable fiscal future. We review historical budget trends and basic fiscal processes. We provide new estimates of the budget outlook, incorporating the recently enacted One Big Beautiful Bill Act (OBBBA), and finding that the debt-GDP ratio will rise to 183% in 2054 under the OBBBA as legislated and to 199% if the temporary tax and spending provisions are made permanent. These figures compare to a current debt-GDP ratio of about 100% and a pre-OBBBA CBO analysis earlier this year that projected the 2054 debt-GDP ratio to be 154%. We estimate a fiscal gap – the permanent tax or spending changes needed to keep the 2054 debt-GDP ratio at its current level – to be about 3.4% of GDP if OBBBA is extended. We discuss the economic and political ramifications of debt and different ways to address the fiscal situation. |
| JEL: | H6 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34455 |
| By: | Doron Sayag; Avichai Snir; Daniel Levy |
| Abstract: | In 1991 and 2008, Israel abolished the equivalents of 1-cent and 5-cent coins, respectively, effectively eliminating low-denomination coins and introducing rounding in cash transactions. When totals were rounded up, shoppers incurred a small rounding tax. Using detailed data on price endings and basket sizes across supermarkets, drugstores, small groceries, and convenience stores, we estimate that the magnitude of the rounding tax borne by Israeli consumers averaged only between 0.001 percent and 0.002 percent of revenues in the fast-moving consumer goods markets. These findings have implications for the ongoing debate regarding the desirability and viability of abolishing the 1-cent and 5-cent coins in the US. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.05599 |
| By: | Antti J. Tanskanen |
| Abstract: | A life cycle model of consumption and labor supply describes employment decisions of a collection of individuals during their lifetime. We develop a life cycle model describing a heterogeneous population operating in Finland under a wide variety of employment states and life situations. A rich life cycle model requires a large state space representing the possible states of simulated agents. The results demonstrate that the model reproduces a number of statistics of the Finnish employment market such as the age structures of employment rate and unemployment rate, distributions of observed effective marginal tax rates and participating tax rates, and proportion of part time work. As an application of analysis of a reform, we analyze how the program of Orpo government influences employment and public finances in Finland. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.00660 |