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on Public Economics |
| By: | Eichfelder, Sebastian; Nguyen, Hang T. T. |
| Abstract: | This study examines the interplay between corporate tax avoidance and the incidence of the corporate income tax falling on wages and employment. Using the German Business Tax Reform 2008 (GBTR 2008) as a natural experiment, we investigate how a large tax cut of about nine percentage points affected wages and the number of employees of low-avoidance firms compared with high-avoidance firms. We expect an abnormal wage response of low-avoidance firms that are more burdened by corporate taxation and benefitted more from the tax cut. In difference-in-differences and triple-difference regressions, we do not find significant evidence for an abnormal wage response of low-avoidance firms. A potential explanation might be strong labour protection regulations in Germany that might limit the ability of German firms to shift corporate taxes on labour. We find some but not very robust evidence for an abnormal increase in employment of low-avoidance firms after the GBTR 2008. Our findings align with recent evidence that German employees bear only a small fraction of German corporate taxation and that this burden primarily falls on employees of very small firms that are only poorly represented in our Amadeus data. |
| Keywords: | Tax Incidence, Corporate Income Tax, Tax Avoidance, Employment Effects, Wage Effects |
| JEL: | E24 H22 H25 J30 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:335021 |
| By: | Javier Garcia-Bernardo (Charles University, Utrecht University); Petr Janský (Charles University); Gabriel Zucman (Paris School of Economics, Berkeley) |
| Abstract: | The 2017 Tax Cut and Jobs Act lowered the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. Between 2017 and 2020, the share of profits booked abroad declined by 1–5 percentage points, in part related to repatriations of intellectual property to the US. However, the share of foreign profits booked in tax havens remained stable at around 50%. While aggregated changes in profit allocation are small, a number of firms responded strongly. |
| Keywords: | Multinational corporation; corporate taxation; profit shifting; effective tax rate; country-by-country reporting; Tax Cuts and Jobs Act |
| JEL: | F23 H25 H26 H32 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:042 |
| By: | Christl, Michael; Berdeal, Silvia Navarro |
| Abstract: | This paper assesses the fiscal and distributional effects of personal income tax expenditures in Portugal using EUROMOD and 2022 EU-SILC microdata. We compare the 2023 tax-benefit system with a counterfactual scenario in which tax expenditures are removed to estimate first-round impacts. We find that tax expenditures account for almost 40% of personal income tax revenues and predominantly benefit middle- and higher-income households, with large variation in redistributive effectiveness across instruments. While the Net Minimum Income Guarantee is progressive and cost-efficient in reducing inequality, most work- and pensionrelated allowances deliver limited equity gains, suggesting scope for reform. |
| Keywords: | Tax expenditures, EUROMOD, Income redistribution, Microsimulation, Fiscal policy, Cost-efficiency |
| JEL: | H24 H22 I38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1705 |
| By: | Holtmann, Svea; Braun, Anna-Sophie; Cho, Jae; Koch, Reinald; Langenmayr, Dominika |
| Abstract: | We study a 2018 reform in South Korea that reduced tax credits for automation investments. This reform increased the tax cost of investing in robots and thus resembles a robot tax. Exploiting this natural experiment with industry-level data on robot installations and firm-level data from Orbis, we document a sharp decline in automation investments after the reform in industries with a large share of affected firms. At the firm level, we find that affected firms increased employment, consistent with the notion that robots replaced workers. The effects are heterogeneous: financially constrained firms cut investment overall, while unconstrained firms substituted away from robots, hired more workers, and reallocated resources toward more productive uses. For the latter group, we find improvements in various measures of investment quality, suggesting that the tax credit induced inefficient overinvestment in automation. Our evidence informs ongoing debates on robot taxation and the efficiency of tax incentives. |
| Keywords: | tax credits, automation, robot tax |
| JEL: | H25 H32 O33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:335022 |
| By: | James Alm (Tulane University); Yvette Lind (BI Norwegian Business School) |
| Abstract: | It is increasingly recognized that the individual income tax leads to disparate treatment by race, ethnicity, and gender, even when the statutory tax code is written in a race-, ethnicity-, and gender-blind way. Partly in response to these disparate treatments, there have been many suggestions for moving the income tax to more neutral treatments of taxpayers. In this paper, we focus on a specific aspect of these reform efforts: making the individual income tax gender neutral. We first examine the many sources of gender non-neutrality in the income tax. We argue that gender non-neutrality arises largely because of deviations of "income" in the tax code from "comprehensive income, " deviations that are driven by the many things that we want the tax to achieve, by the ways in which the specific features of the income tax interact with the economic decisions and roles of individuals, and by the differences in these decisions and roles between women and men. We illustrate the results of these tax features on gender non-neutrality with several specific examples drawn largely from Scandinavian tax practices. We conclude that it is possible to make the income tax more gender neutral, so that a gender-neutral income tax is feasible. However, we also conclude that complete gender neutrality would come at the expense of other desired goals; that is, complete gender neutrality is at odds with all that we ask of the tax code, including targeting tax benefits at groups like women who have experienced significant historical inequities in their tax treatment, so that a completely gender-neutral income tax is not desirable because we wish to use the income tax to achieve many other worthwhile goals. Safeguards actively promoting the specific circumstances of women may be necessary, as such biased tax features could be used as a way of moving toward more gender-equal outcomes. In light of these arguments, we suggest that one alternative to promoting complete gender neutrality in the tax code could be to consider affirmative action in some circumstances as a way of fostering gender-neutral outcomes, rather than to aim for a gender-neutral tax code with inequitable outcomes induced by societal and cultural influences. Another option that has proven successful elsewhere could be to actively employ gender budgeting assessments when introducing new tax legislation and budgets. |
| Keywords: | Broad-based, low-rate taxation, comprehensive income, Haig Simons standard, optimal taxation, tax reform |
| JEL: | H2 H7 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2508 |
| By: | J. Sebastian Leguizamon (Western Kentucky University); Susane Leguizamon (Western Kentucky University); James Alm (Tulane University) |
| Abstract: | It is increasingly recognized that race interacts in important ways with taxation, including taxation of the family. In this paper, we quantify the racial disparity in the magnitude of the "marriage penalty" or "marriage bonus" in the Earned Income Tax Credit (EITC) using individual micro-level data from the Current Population Survey from 1992 to 2019. We find that among households experiencing a penalty, low-income Black households' is, on average, 22 percent larger than that for low-income white households, even when their family income levels are largely the same. These racial inequities are troubling, given the impact of this program on low-income individuals across the United States. |
| Keywords: | EITC, Marriage, taxable unit, marriage penalty and bonus, race |
| JEL: | H24 J12 J16 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2506 |
| By: | Lara Wemans; et al. |
| Abstract: | This paper presents a comprehensive characterization of “fiscal drag”—the increase in tax revenue that occurs when nominal tax bases grow but nominal parameters of progressive tax legislation are not updated accordingly—across 21 European countries using a microsimulation approach. First, we estimate tax-to-base elasticities, showing that the progressivity built in each country’s personal income tax system induces elasticities around 1.7–2 for many countries, indicating a potential for large fiscal drag effects. We unpack these elasticities to show stark heterogeneity in their underlying mechanisms (tax brackets or tax deductions and credits), across income sources (labor, capital, self-employment, public benefits), and across the individual income distribution. Second, we extend the analysis beyond these elasticities to study fiscal drag in practice between 2019 and 2023, incorporating observed income growth and legislative changes. We quantify the actual impact of fiscal drag and the extent to which government policies have offset it, either through indexation or other reforms. Our results provide new insights into the fiscal and distributional effects of fiscal drag in Europe, as well as useful statistics for modeling public finances. |
| JEL: | D31 H24 E62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202516 |
| By: | Brun Lidia (European Commission - JRC); Speitmann Raffael (European Commission - JRC); Stasio Andrzej Leszek (European Commission - JRC); Stoehlker Daniel (European Commission - JRC) |
| Abstract: | This report presents new estimates of the Corporate Income Tax (CIT) compliance gap for 23 EU Member States, Norway, and Iceland, using a harmonised top-down methodology developed by the Joint Research Centre (JRC). The CIT compliance gap reflects the shortfall in revenue due to non-compliance with tax laws, including tax evasion and certain forms of tax avoidance. Recognising the limitations of existing methods—particularly the data demands of the IMF’s RA-GAP approach—the JRC proposes a simplified, scalable methodology based on Eurostat’s Tabular Approach to Exhaustiveness. This method leverages adjustments for undeclared economic activity in national accounts to estimate the gap in a transparent and comparable way. The results highlight substantial variation across countries, with compliance gaps ranging from under 3% to over 35%, and an average shortfall of 10.9% of potential CIT revenues in 2017. Sectoral analysis for selected countries reveals systematic differences in compliance across industries. The approach offers a feasible and replicable tool for regular monitoring of corporate tax compliance, supporting evidence-based policymaking and cross-country comparison. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc143824 |
| By: | Piotr Denderski; Tim Obermeier |
| Abstract: | An enduring source of gender inequality is that some high-paying ("nonlinear") occupations penalize balancing work and household time commitments, as emphasized by Goldin (2014). We ask how household taxation interacts with these occupational differences to shape gender gaps in hours, wages, and occupational choice, and whether these differences materially affect the impact of tax reforms. We address these questions in a structural Roy model of household labor supply with occupation-specific earnings-hours nonlinearities and progressive taxation, calibrated to US data. We find that a balanced-budget switch to separately filed progressive taxes significantly reduces the gender gaps in hours and occupational choice, while the wage gap declines more modestly. These improvements arise because the reform lowers marginal tax rates for secondary earners and raises them for primary earners. By contrast, proportional taxation yields much smaller reductions in gender gaps. In both reforms, the standard labor-supply channel accounts for roughly two-thirds of the overall taxable- income response, while the convex earnings-hours relationship amplifies these effects and explains most of the remainder. Occupational switching contributes little because those who do switch are negatively selected. |
| Keywords: | household taxation, nonlinear occupations, occupational choice, gender inequality |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2140 |
| By: | J. Sebastian Leguizamon (Western Kentucky University); Susane Leguizamon (Western Kentucky University); James Alm (Tulane University) |
| Abstract: | In this paper, we quantify the ways by which gender, race, and earnings differentials affect the magnitude of the "marriage penalty" or "marriage bonus" in the Earned Income Tax Credit (EITC) using individual micro-level data from the Current Population Survey from 2010 to 2018. Our results show that on average Black couples experience a larger EITC marriage penalty (or a smaller EITC marriage bonus) than white couples. This differential is due mainly to gender differences across race in household income splits, in dependents, and in earnings levels. It is neither surprising nor accidental that these three factors are also the main determinants of the EITC benefit itself. |
| Keywords: | EITC, Marriage, taxable unit, marriage penalty and bonus, race |
| JEL: | H24 J12 J16 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2507 |
| By: | Gasior, Katrin; Jara, H. Xavier; Makovec, Mattia |
| Abstract: | By means of counterfactual simulation methods, this paper quantifies the role of tax–benefit policies in mitigating the shock of the COVID-19 pandemic to household income in the European Union. The tax-benefit microsimulation model for the European Union EUROMOD is used to decompose changes in the income distribution into the effects of: (i) earnings losses due to COVID-19, (ii) automatic stabilizers, (iii) monetary compensation schemes introduced during the pandemic; and (iv) COVID-19-specific reforms to taxes and benefits implemented by European Union governments. The results show a great deal of heterogeneity between countries in terms of earnings losses and the effect of tax-benefit policies during the COVID-19 pandemic. In most countries, the largest contribution to cushioning the economic shock of the pandemic comes from monetary compensation schemes. Automatic stabilizers also play a role, mainly through the effects of social insurance contributions, taxes, and unemployment insurance benefits. Tax-benefit systems cushioned incomes to a large extent even among those most severely affected by the shock to earnings, with an important role for monetary compensation schemes, but also a larger stabilizing effect of unemployment insurance. Among automatic stabilizers, social assistance benefits played an important role in cushioning the income shock for the poorest quintiles among the most severely affected, but only in selected countries. |
| Keywords: | social protection; social safety nets and transfers; social welfare; Covid-19; poverty and fiscal; financial and economic crisis; EU; income distribution; coronavirus |
| JEL: | D31 E24 H24 I38 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124121 |
| By: | Juan Camilo Obando Martínez (Universidad de los Andes) |
| Abstract: | Accurate measurement of income inequality remains a critical challenge in developing economies, particularly due to the underreporting of top incomes in traditional household surveys. In Colombia, while previous research has improved income measurement through tax records, these approaches fail to capture undistributed corporate profits that constitute a significant portion of top earners’ economic resources. This study addresses this limitation by employing Colombia’s Beneficial Ownership Registry (BOR), a novel administrative dataset linking corporate entities to their ultimate individual beneficiaries. I assess the BOR’s strengths in revealing ownership transparency and its limitations. Building on this foundation, I develop a economic income measure that allocates undistributed corporate profits to individuals, revealing that incomes of the top 0.01% nearly double when these profits are included. Extending this framework to effective tax rates (ETRs) shows that ETRs increase throughout the personal income distribution, while the overall shape of the ETR profile remains unchanged. In particular, effective tax rates continue to decline at the very top of the distribution. Thus, corporate taxes act as a partial backstop by raising effective tax rates throughout the distribution, even though the regressive pattern at the very top persists. Finally, comparisons with France and Brazil highlight similar regressive patterns and the potential of administrative datasets like the BOR to enhance fiscal transparency and equitable tax policy. |
| Keywords: | Top incomes, tax progressivity, corporate profits, beneficial ownership, inequality measurement |
| JEL: | D31 H24 H26 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:022127 |
| By: | Albrecht Bohne; James R. Hines Jr.; Antonios M. Koumpias; Annalisa Tassi |
| Abstract: | The purpose of this paper is to evaluate the effect of reverse-charge mechanism (RCM) implementation on VAT compliance using an overall, country-level measure of VAT compliance, the VAT gap. The VAT gap is defined as the overall difference between expected and realized VAT revenues and is a broader measure than outcomes employed in previous research, incorporating all types of VAT evasion. Exploiting the staggered adoption of RCM across Europe and the size of industries targeted by RCM, we compare changes in the VAT gap before and after RCM implementation. Evidence from difference-in-differences, event study, and heterogeneous treatment effects estimators indicates that the adoption of the RCM does not lead to significant EU-wide changes on the aggregate VAT gap. Moreover, our results illustrate the mixed impacts of RCM on different goods and industries, with measurable decreases in VAT losses in the construction and industrial crops industries. This study’s findings do not provide strong support for policy changes that cast the net of the RCM wider on all industries and EU member states, although bilateral coordination in RCM adoption with top trading partners may assist in curbing VAT fraud relocation. |
| Keywords: | Tax evasion, VAT, VAT gap, reverse-charge mechanism, carousel fraud |
| JEL: | H26 K42 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:fbk:wpaper:2026-01 |
| By: | Eichfelder, Sebastian; Hundsdoerfer, Jochen; Kaltenhäuser, Martin; Noack, Mona |
| Abstract: | We provide evidence that the capitalization of taxes in share prices depends on investor attention and can create additional implicit taxes for inattentive investors. Interpreting a German capital gains tax reform as a natural experiment, we identify investor attention by the temporal distance to the deadline (deadline effect) and media coverage (media effect). Although the reform was announced 18 months in advance, we find evidence for large abnormal returns around the deadline. In the two days preceding it, daily returns (share prices, trading volumes) of treated stocks increased abnormally by 2.5 pp (7.0%, 296.7%). The cumulative abnormal return CAR one day before the deadline was 10.7%. The media coverage also abnormally increased returns and trading activity. In the last months of 2008, 20 additional articles per week on the reform resulted in a CAR of about 2% in one week. Inattentive investors paid abnormally high prices in periods of high attention, implying an implicit tax burden of up to 67.9% of realized and 130.5% of expected returns one day before the deadline. |
| Keywords: | Implicit taxes, information dissemination, investor attention, announcement effect, deadline effect, tax capitalization |
| JEL: | G12 G14 H24 M40 M48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:335023 |
| By: | James Alm (Tulane University); Rida Belahouaoui (Cadi Ayyad University) |
| Abstract: | This study examines the role of artificial intelligence (AI) tools in enhancing tax fraud detection within the ambit of the OECD Tax Administration 3.0, focusing on how these technologies streamline the detection process through a new "Adaptive AI Tax Oversight" (AATO) framework. Through a textometric systematic review covering the period from 2014 to 2024, we examine the integration of AI in tax fraud detection. The methodology emphasizes the evaluation of AI's predictive, analytical, and procedural benefits in identifying and combating tax fraud. The research underscores AI's significant impact on increasing detection accuracy, predictive capabilities, and operational efficiency in tax administrations. Key findings reveal the ways by which the development and application of the AATO framework improves the tax fraud detection process, and the implications offer a roadmap for global tax authorities to utilize AI in bolstering detection efforts, potentially lowering compliance expenses and improving regulatory frameworks. |
| Keywords: | Artificial intelligence, tax fraud, AATO framework, blockchain, neural networks, data mining |
| JEL: | C45 H26 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2511 |
| By: | Ali Enami (The University of Akron); Kile Byington (Twinsburg Public Library); James Alm (Tulane University) |
| Abstract: | Do the sources of funding available to public agencies and shocks to these sources affect the performance of these agencies? Using data on Ohio public libraries, we exploit the sudden state budget cuts implemented in 2009 following the 2008 recession, along with the bureaucratic delay in approving new local property tax levies to make up for the lost state funding, in order to compare the performance of libraries that had access to property taxes prior to 2008 to those that relied exclusively on state funding. We find that libraries with diversified funding, and so with access to relatively stable property taxes, demonstrated higher service across a wide range of performance indicators in the first year of funding stabilization following the budget cuts relative to libraries without local funding. These effects decrease by about one-half to two-thirds by the fifth year, but they remain statistically significant at the 1 percent level. |
| Keywords: | Property tax, operating funding, funding stabilization, public library, library performance |
| JEL: | H41 H71 H76 L86 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2509 |
| By: | Alessandro Sovera (Tampere University and FIT) |
| Abstract: | This paper estimates the causal effect of mandatory inter-municipal cooperation on local welfare, using housing markets as the primary indicator. I study Italy’s 2010 reform, which required small municipalities to jointly manage core administrative functions, and identify its impact through a fuzzy difference-in-discontinuity design. Among municipalities whose cooperation status changed because of the mandate, residential property values fell by 4–6 percent and commercial values by 11–18 percent. These declines stem from deterioration in childcare, policing, street lighting, and waste collection rather than from changes in taxation or housing supply, both of which remain stable. The mandate also reduced population growth and net migration, consistent with residents responding to lower service quality. Compliance was limited — about 29 percent of eligible municipalities participated — and concentrated among those with greater administrative capacity. The results show that mandatory cooperation can erode local amenities and capitalized wealth, suggesting that policymakers should be cautious with uniform consolidation mandates and consider voluntary or capacity-building approaches instead. |
| Keywords: | Inter-municipal cooperation, Housing markets, Local public services, Administrative capacity, Local welfare and amenities |
| JEL: | H70 H71 H72 R23 R31 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fit:wpaper:40 |
| By: | Elena Bassoli (ETH Zurich; Ca’ Foscari University of Venice); Ylenia Brilli (Ca’ Foscari University of Venice; CHILD-Collegio Carlo Alberto) |
| Abstract: | This paper analyzes how a reform increasing statutory retirement age from 60 to 64 affected women's incentives for early retirement. In Italy, women can anticipate retirement at 57 (with 35 contribution years), but subject to an annuity penalization. Using Italian administrative data, we compare women eligible for the early retirement scheme before and after the reform, finding a small effect on women's retirement age, but a substantial negative effect on annuity. Effects are stronger for women with low labor market attachment or working full-time, suggesting that reconciliation of paid and unpaid works is an important driver of early retirement choices. |
| Keywords: | statutory retirement; early retirement; women’s labor market attachment; social security wealth |
| JEL: | J16 J20 J22 J26 H55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2025:30 |
| By: | Neil Rankin |
| Abstract: | Staggered prices and finitely-lived agents create scope for a debt-financed tax cut to raise output. We study analytically how the impact multiplier depends on whether debt is expected gradually to return to its original level or else to rise to a permanently higher level, and on the speed of this. Under a simple Taylor Rule, the first debt path raises, but the second lowers, output on impact. With the first debt path, the multiplier is also probably hill-shaped in debt persistence. However, even a short-lived initial exogenous nominal interest-rate peg makes the multiplier probably positive with both debt paths. |
| Keywords: | fiscal deficit, staggered prices, finitely-lived agents, overlapping generations, output multiplier, debt persistence, debt gradualism, Taylor Rule, temporary nominal interest-rate peg |
| JEL: | E62 E63 H62 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:yor:yorken:26/01 |