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on Public Economics |
| By: | Xavier Dufour; Pierre-Carl Michaud; Michael G. Smart |
| Abstract: | We estimate heterogeneous responses to top-bracket tax reforms using a triple-difference design that exploits variation in tax rate changes and the thresholds at which they apply. This strategy identifies behavioral responses even in the presence of unobservable shocks to the income distribution. Higher-income taxpayers respond more to top-rate changes, but our results indicate that this reflects the salience of the reforms—the larger mechanical change in average tax rates at higher incomes—rather than heterogeneity in substitution elasticities. We discuss implications for the revenue and distributional effects of top-bracket tax reforms. |
| JEL: | D31 H21 H24 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34731 |
| By: | Anders Jensen; Jonathan L. Weigel |
| Abstract: | The empirical economics literature on taxation in developing countries has centered on the importance of third-party information for enforcement. Yet, while surely a long-run objective, leveraging such information remains out of reach in many developing countries due to largely informal economies and low state capacity. This article examines an emerging complementary literature focused on strengthening the 'sinews' of state capacity: tax administration. We argue that reforms to the organizational structure, personnel management, and task management of tax authorities have potential to raise tax capacity in developing countries. We also argue that efforts to improve the state's legitimacy – popular acceptance of its right to tax – can increase capacity and may complement investments in tax administration. Our approach bridges a long-standing divide between how scholars in public finance and political economy approach tax capacity building in developing countries. |
| JEL: | D70 O10 P00 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34729 |
| By: | Leonzio Rizzo; Riccardo Secomandi; Luisa Loiacono; Enrico Rubolino |
| Abstract: | In extraordinary times, policy makers need to find new ways to finance public expenditures and restore public budgets. Taxing who benefit from the extraordinary time would be the easy way, but the threat of negative trickle-down responses often make policy makers reluctant to go along this road. This paper studies how big corporations respond to tax hikes in extraordinary times. We leverage variations from the “Robin Hood†tax: a large surcharge applying to Italian firms operating in the energy sector with revenues above a discrete threshold. After showing that firms did not game the law by manipulating their revenues, our regression discontinuity estimates provide compelling evidence that the tax did not hurt in vestments nor profits, and that the tax burden is not shifted to workers. Moreover, our results are confirmed by the additional analysis we run using a difference in difference approach. |
| Keywords: | corporate taxation; big corporation; regression discontinuity design |
| JEL: | H22 H25 G38 L25 |
| Date: | 2025–11–03 |
| URL: | https://d.repec.org/n?u=RePEc:udf:wpaper:20250214 |
| By: | Marzian, Johannes; Trebesch, Christoph |
| Abstract: | What are the fiscal consequences of large military buildups? To address this question, we assemble the Global Budget Database, a comprehensive dataset of disaggregated government finances for 20 countries from 1870 to 2022. We identify 114 episodes of military spending booms, in peace and war, and analyze their financing and long-term fiscal legacy. Consistent with theory, wartime booms are financed primarily through debt, while smaller peacetime booms rely on a more balanced mix of debt and taxes. In contrast to the classic notion of "guns versus butter, " we find little evidence that social spending is cut during military expansions. Instead, when societies rearm, they tend to choose guns and butter, resulting in substantially higher debt and taxes long after the military boom ends. Tax rates and tax revenues remain elevated for 15 years or more, as tax increases during the buildup are not rolled back. Large geopolitical shocks expand the fiscal state and result in a persistently higher tax burden. |
| Keywords: | Military finance, rearmament, war, fiscal policy, taxes, government debt |
| JEL: | E62 H20 H61 H87 N10 N40 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:335894 |
| By: | Laurence Jacquet; Zhiyang Jia; Thor O. Thoresen (CY Cergy Paris Université, THEMA) |
| Abstract: | Empirical evidence suggests that social acceptance of redistribution depends on whether income differences result from preferences (of which individuals are responsible) or from circumstances. We propose a new empirical method that measures the importance of preferences in the distribution of welfare in the context of tax reforms. We compare two types of Compensating Variation: the standard CV and a new one (CVcirc), which is computed assuming that individuals differ only in circumstances. To obtain these metrics, we first estimate a structural job choice model that allows us to take the preferences/circumstances dyad into account. We then use the estimated parameters to compute our two metrics, leveraging a tax reform and applying a simulation approach `a la McFadden (1999). Implementing our method with Norwegian data, we find that both welfare metrics display a very similar distribution, except at the very top of the households’ income distribution, suggesting this is where responsibility matters. |
| Keywords: | Tax Avoidance, Multinational Investment, Profit Shifting |
| JEL: | F23 H25 H26 H32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2026_1 |
| By: | Nguyen, Hang T. T. |
| Abstract: | This paper investigates the relationship between corporate income tax rates (CITR) and firm-level productivity growth using AMADEUS data of 304, 410 observations from 79, 842 European firms from 2006 to 2019. The results imply a robust non-linear relationship: higher CITRs are positively associated with productivity growth for high-productivity firms near the technological frontier and negatively associated with the productivity catch-up of less productive firms. Heterogeneity tests suggest a stronger productivity response to tax rate changes of small and medium-sized enterprises (SMEs) and domestic firms, while I do not find a significant productivity response to tax rate changes for large and multinational firms. The main findings are robust across various productivity estimation methods and model specifications and challenge the conventional view that higher business tax rates have a linear and negative effect on productivity growth. The paper contributes to the ongoing debate about the role of corporate taxation in shaping economic competitiveness and long-term growth. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:335901 |
| By: | Aya Ouchene (ESCA Ecole de Management, Morocco); Azzeddine Allioui (ESCA Ecole de Management, Morocco) |
| Abstract: | This paper discussеs thе tоpic оf tаx frаud аnd prеsеnts sоlutiоns tо hеlp businеssеs cоmply with rеgulаtiоns. Tаx frаud cаn tаkе vаriоus fоrms, such аs undеrrеpоrting incоmе, mаnipulаting invоicеs, VРT frаud, аnd intеrnаtiоnаl tаx еvаsiоn. Thеsе illеgаl prаcticеs cаn hаvе sеvеrе cоnsеquеncеs, bоth fоr businеssеs аnd fоr public finаncеs. By еxplоring thеsе typеs оf frаud, thе study highlights thе criticаl rоlе оf tаx аdvisоrs in idеntifying incоnsistеnciеs аnd аssеssing risks. It аlsо prоpоsеs rеcоmmеndаtiоns tо strеngthеn cоmpliаncе, such аs еnhаncing intеrnаl cоntrоls, imprоving thе prоcеss fоr vеrifying suppliеrs, аnd using аdvаncеd tеchnоlоgiеs tо dеtеct suspiciоus аctivitiеs. Thе paper thеn еxаminеs thе impаct оf VРT withhоlding, а mеаsurе thаt cаn hеlp prеvеnt tаx frаud. By аdоpting thеsе аpprоаchеs, businеssеs cаn rеducе thе risk оf cоstly pеnаltiеs аnd еstаblish strоng rеlаtiоnships with tаx аuthоritiеs. |
| Keywords: | tax fraud, compliance, VAT fraud, internal controls, tax advisors, advanced technologies |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:smo:raiswp:0557 |
| By: | Richiardi, Matteo; van de Ven, Justin; Popova, Daria |
| Abstract: | This paper analyses how UK tax-benefit policies shaped poverty, inequality, and living standards between 2019 and 2023, spanning the COVID-19 shock and the subsequent cost-of-living crisis. Using the UKMOD tax-benefit microsimulation model combined with imputed household consumption data, we assess distributional outcomes for both disposable and consumable income, the latter accounting for indirect taxes. We apply fiscal incidence and decomposition techniques to distinguish the effects of changes in market incomes and population characteristics from discretionary policy choices. We find that market income inequality and poverty increased over the period, but the UK tax-benefit system became more redistributive. Disposable income inequality declined and the poverty-reducing impact of taxes and transfers strengthened during and after the pandemic. Regressive indirect taxes, however, weaken the gains achieved through direct redistribution, particularly for low-income households. Decomposition results show that real consumable incomes rose for the bottom three deciles, despite falling market incomes, due to uprated means-tested benefits and targeted cost-of-living payments. In contrast, middle- and higher-income households experienced sizeable real losses, driven mainly by policy effects rather than labour market developments. Frozen income tax thresholds generated substantial fiscal drag, reduced the progressivity of personal income tax, and accounted for most income losses outside the bottom of the distribution. Overall, policy changes over 2019 to 2023 protected low-income households in relative terms while reducing real living standards across much of the rest of the distribution through implicit fiscal consolidation. |
| Date: | 2026–01–18 |
| URL: | https://d.repec.org/n?u=RePEc:ese:cempwp:cempa1-26 |
| By: | Sam Desiere; Rigas Oikonomou; Tiziano Toniolo; Bruno Van der Linden; Gert Bijnens (-) |
| Abstract: | Belgium’s 2016 payroll tax exemption for first-time employers triggered a sharp increase in firms hiring their first worker but little growth among larger firms. To account for this pattern, we develop and estimate a directed search model—with discrete hiring, firm heterogeneity, and endogenous entry—using Belgian microdata. The exemption reduces the high marginal cost of the first hire, enabling many previously non-hiring entrepreneurs to become employers, but most lack the productivity needed to expand beyond one worker. The model matches the post-reform size distribution and identifies the conditions under which size-dependent hiring subsidies can foster sustained firm growth. |
| Keywords: | payroll taxes, size-dependent policies, hiring frictions, wage subsidies, competitive search theory |
| JEL: | H25 J08 J23 J38 L25 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:26/1133 |
| By: | Hundsdoerfer, Jochen; Löwe, Maren |
| Abstract: | We analyze how value added taxes (VATs) affect labor market outcomes (firms' employee costs, wages, hours worked, employment). While VATs are designed to tax consumption, they are levied at the firm level, which creates potential spillovers to labor markets. We hypothesize that VATs affect wages and employment through two channels: an inflation adjustment effect, where employees demand higher wages to compensate for VAT-induced price increases; and a profitability effect, where incomplete pass-through reduces firms' net sales and profits, putting downward pressure on wages and employment. We exploit variation in VAT rates, measuring labor market outcomes at the firm and country level. We find economically significant negative effects of VAT rates at the firm level on employee costs and at the country level on wages and employment. At the firm level, a one percentage point increase in the standard VAT rate corresponds to a 3.886% reduction in employee costs. At the country level, the same increase is associated with a 2.802% decline in average nominal wages. We find a 1.444% decline in employment at the country level following a one percentage point increase in the VAT rate. For working hours, the evidence is inconclusive and at most suggests a reduction. Heterogeneity analyses suggest that small firms and firms with high profit margins react stronger; among the employees, the age group 15-24 years is hit hardest. Our study provides the first systematic cross-country evidence on the labor market consequences of VATs. |
| Keywords: | VAT, Labor Supply, Labor Demand, Wages, VAT Incidence, Inflation, Wage Bargaining |
| JEL: | D22 D24 H22 H25 M51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:335902 |
| By: | Christopher Phelan |
| Abstract: | This paper explores the effects of one nation's taxation of consumption on the welfare of future generations of other countries. To do this, it presents an otherwise standard one-good, two-country optimal growth model with free capital markets, but where each date represents the lifetime of a generation which cares not only about its own consumption and leisure, but also that of its descendants. Relative to a no tax benchmark, a policy of one country taxing consumption of its initial generations has ambiguous welfare effects for future generations of the other country, as long as those future generations are not too far in the future. Higher initial savings in the first country raises capital levels, and thus wages, in both countries, raising welfare of future generations in the second country, but also induces lower bequests in the second country, lowering the welfare of its future generations. In the long run, or for generations born near the steady state, the welfare effects of the first country inducing lower consumption of its initial generations are unambiguous: future generations of the second country are made worse off. Households born in the second country will regret that their ancestors allowed such policy-induced intertemporal trade. |
| JEL: | D31 E62 F60 H2 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34740 |
| By: | Olteanu, Dan Constantin (Romanian Academy, National Institute of Economic Research) |
| Abstract: | This study provides a comparative analysis, for the European countries, of how the volume and structure of public debt have evolved during the pandemic and in the following years. We will study the trend of public debt share in government revenues, the dynamics of public debt structure by financial instruments and maturity, the evolution of external and foreign currency public debt, the interest expenditures and the apparent cost of debt. The analyses show a substantial accumulation of debt in the EU27, with an average rate of over 6% in the period 2020-2023. Romania's public debt increased, in nominal terms, more than double between 2019 and 2023. The slope of the debt trend in Romania (rate of over 17% in 2022-2023) is worrying and its perpetuation over the next few years would put pressure, through debt service, on public spending that is already oversized in relation to revenues. |
| Keywords: | public debt, debt structure, debt trend, debt stabilisation, government financing |
| JEL: | H60 H63 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ror:wpince:241217 |
| By: | Makoto Hasegawa (Graduate School of Economics, Kyoto University); Takafumi Kawakubo (Osaka School of International Public Policy, the University of Osaka); Takafumi Suzuki (Faculty of Business, Aichi Shukutoku University); Masayoshi Hayashi (Faculty of Economics, the University of Tokyo) |
| Abstract: | Using Japanese firm-level customs data from 2014 to 2019, we investigate profit shifting through transfer pricing by Japanese multinational corporations. We find that Japanese firms reduce related-party export prices relative to arm's-length prices as the tax differentials between Japan and destination countries widen, indicating tax-motivated transfer pricing. The responsiveness of related-party prices to these taxdifferentials is, on average, smaller than that reported in previous studies but varies depending on transaction characteristics. Specifically, transfer mispricing is more pronounced in transactions involving larger parent-affiliate pairs and products that are exported less frequently. We also examine the impact of the country-by-country reporting (CbCR) system, introduced in Japan in 2016, and find no evidence that it reduced transfer mispricing by Japanese multinationals subject to CbCR. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2026cf1266 |
| By: | Badalyan, Sona (IAB, CERGE-EI) |
| Abstract: | "I study how delayed retirements reshape firms internal labor markets, leveraging a German reform that raised womens early retirement age by at least three years. The reform increased retention of older women and reduced both internal promotions and external hiring of younger coworkers, with the greatest losses among middle-aged workers who were near to older workers on the career ladder. Spillovers are structured: promotion crowd-outs arise in thick internal labor markets with intense competition, while hiring declines are largest in thin external markets with high turnover costs. Crowd-out effects concentrate within jobcells, whereas coworkers in different jobcells can benefit when retained older workers possess specific human capital. Taken together, the evidence supports slot-constraint theoriesaugmented by firm-specific human-capital mechanisms." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | H55 J21 J23 J24 J26 J31 J63 M51 |
| Date: | 2026–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:iab:iabdpa:202601 |
| By: | Maria Chaykina (Department of Economics (University of Verona)) |
| Abstract: | Notional Defined Contribution (NDC) pension schemes convert accumulated pension wealth into an annuity, based on an average life expectancy at retirement. When longevity differs across social groups, a single conversion factor implies systematic transfers from shorter-lived to longer-lived individuals. This motivates proposals to differentiate benefits by socio-demographic characteristics related to life expectancy. We study whether such differentiation is perceived as fair using a survey experiment involving 3, 004 Italian residents aged 18-66. Respondents completed an incentivised allocation task used to elicit their fairness views and then evaluated six reform scenarios that adjust pension benefits based on gender, region, income, household wealth, workplace fatigue, and health status. The results show that the fatigue-based and wealth-based scenarios receive the highest support, whereas the gender-based and region-based scenarios are strongly opposed. Self-interest predicts approval, with higher support among those who stand to gain from a reform. Respondents with libertarian views are consistently less supportive of changes in benefits, while egalitarians and, to a lesser extent, liberal egalitarians are more favourable. Our results inform policymakers on the importance of citizens’ fairness perceptions for the implementation and communication of financially sustainable pension reforms. |
| Keywords: | Pensions, Fairness, Life Expectancy, Survey Experiment, Redistribution, Italy |
| JEL: | H55 D63 C91 C38 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ver:wpaper:01/2026 |