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on Public Economics |
| By: | Naritomi, Joana; Nyamdavaa, Tsogsag; Campbell, Stephanie |
| Abstract: | Over the past decade, governments worldwide have introduced incentive programs - often in the form of lottery prizes - to encourage consumers to help combat tax evasion. While similar programs date back to the 1950s, the rapid expansion of Value Added Tax (VAT) systems in developing countries, combined with the Information Technology revolution, has reshaped the tax enforcement policy toolbox, leading to a recent surge in enforcement policies through consumer incentives. This paper reviews the rationale behind these policies, documents variations in their design, and examines the conditions under which they can enhance compliance and raise revenue. |
| Keywords: | tax compliance; VAT; tax enforcement; consumer rewards; lotteries |
| JEL: | H25 H26 E26 |
| Date: | 2025–05–16 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127223 |
| By: | Jonathan S. Hartley; Kevin A. Hassett; Joshua D. Rauh |
| Abstract: | The Tax Cuts and Jobs Act of 2017 (TCJA) marked the first time in three decades that material changes were made to the corporate tax code of the United States. We use TCJA as a quasi natural experiment to estimate the impact of changes in user cost of capital on investment. Following the method of Auerbach and Hassett (1991), using cross-sectional data we find that the user cost is associated with higher rates of investment consistent with previous studies. BEA asset types with greater reductions in user cost of capital and marginal effective tax rate (METR) after the 2017 TCJA had greater statistically significant increases in their investment rates several years after the tax reform. Specifically, we find the magnitude of a 1 percentage point decrease in user cost is associated with a 1.68 to 3.05 percentage point increase in the rate of investment, larger than prior estimates of the responsiveness of investment with respect to user cost of capital. |
| JEL: | E22 H20 H25 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33914 |
| By: | William Chandler; Alastair Thomas; Frederic Tremblay |
| Abstract: | The value-added tax (VAT) has proved to be a highly effective tool at raising revenue in developed and developing countries alike. However, the effective operation of the VAT breaks down in the presence of exemptions. Unlike zero rates, exemptions deny input tax credits, thereby increasing production costs and resulting in VAT being embedded within the prices of goods and services. This paper develops a VAT model based on input-output table and household budget survey data for 29 European countries to examine the effects of VAT exemptions on final prices and to assess the merits of their use. Simulation results show that exemptions suffer from the same targeting problems as reduced VAT rates, but, in addition, they are non-transparent and have unpredictable and counterproductive indirect effects. These effects are in addition to the well-known distortionary impact of exemptions on production decisions, and their creation of incentives to self-supply. The paper concludes that the use of exemptions should be limited to addressing pragmatic concerns, such as the disproportionate compliance costs of small businesses and the practical difficulty in taxing margin-based financial services. |
| Date: | 2025–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11120 |
| By: | Christl, Michael; Köppl-Turyna, Monika |
| Abstract: | This paper extends the traditional concept of disposable income by including in-kind transfers for education and health as well as consumption taxes in the analysis. This extended view of tax-benefit systems offers a more comprehensive understanding of redistribution mechanisms within countries and facilitates crosscountry comparisons. As a first step, our analysis identifies households as either net contributors or net beneficiaries based on this extended income concept. Our results show that there is considerable variability in net fiscal contributions across households, influenced by factors such as income level, household composition and age. We find that extending the income concept reduces the number of net contributor households, as the monetary effect of in-kind benefits outweighs the effect of consumption taxes paid. However, the number of net contributor households varies considerably across EU Member States. In a second step, we take a life-cycle perspective and estimate the contribution of each age cohort in each EU Member State. Our results show that individuals contribute very differently over the life cycle across Member States and that these contributions are highly correlated with individuals' retirement decisions. We show that corporatist welfare state regimes in particular tend to have low and even negative life cycle contributions compared to universal welfare state systems and the Baltic insurance systems, with early retirement playing a crucial role in shaping these differences. |
| Keywords: | tax-benefits model, EUROMOD, welfare state, in-kind benefits, indirect taxes, redistribution |
| JEL: | H23 I38 H24 D31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1620 |
| By: | Mr. Irving Aw; Brendan Crowley; Mr. José M. Garrido |
| Abstract: | Countries differ in their approaches to the treatment of tax claims in insolvency. Historically, most countries have granted priority to tax claims. In the late 20th century, however, some countries abolished or reduced tax priorities at the same time that sweeping insolvency reforms were introduced. Since then, the debate over whether tax claims should be afforded priority in insolvency has continued. This paper reviews the various legal techniques used to protect tax claims in a wide range of countries, the arguments in favor and against tax priorities, and advocates for an empirical approach to analyzing this complex problem. |
| Keywords: | Bankruptcy; Insolvency; Tax Policy; Credit |
| Date: | 2025–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/118 |
| By: | Gabriel Chodorow-Reich |
| Abstract: | Economists have widely varying opinions of how corporate taxation affects aggregate investment, output, and wages. This disagreement reflects a 60-year history of misapplication of the neoclassical theory of investment to interpret empirical work and guide policy analysis. In this article I reconsider the accumulated evidence relating tax policy to firm investment through the lens of the neoclassical theory. Empirical work suggests a range for the firm-level, short-run semi-elasticity of the investment-to-capital ratio to the user cost of -0.25 to -0.75. The mid-point of this range translates into values for the elasticity of firm revenue to capital of between 0.22 and 0.35. The implied general equilibrium, long-run elasticity of capital to the user cost can differ substantially from leading policy models. The elasticity of the wage to the user cost ranges from -0.3 to -0.7, or from -0.1 to -0.2 for changes to the user cost in the C-corporate sector alone. In the relatively low-tax regime in the U.S. in 2024, the neoclassical contribution to higher output from higher capital cannot rationalize more than modest dynamic tax revenue offsets from further reductions in corporate taxation. |
| JEL: | E23 G31 H25 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33922 |
| By: | Longden, Thomas (University of Western Sydney); Naghsh Nejad, Maryam (University of Technology, Sydney) |
| Abstract: | This paper examines how individuals respond financially to severe health shocks by analyzing early withdrawals from retirement savings following the initiation of cancer treatment (chemotherapy). Using comprehensive administrative data from Australia that link health, tax, and demographic records, we study behavior in a setting with universal health coverage and a mandatory retirement savings scheme that permits early access under hardship provisions. We find that early withdrawals increase significantly in the year of and the year after treatment, particularly among individuals who lose income or receive a terminal diagnosis. To interpret these patterns, we extend a dynamic Grossman-style model of health capital to account for survival probabilities and institutional features of the retirement system. Our findings show that health shocks prompt individuals to draw down retirement savings as a form of self-insurance, revealing how health risks interact with retirement policy. These results inform ongoing debates about the flexibility and adequacy of retirement savings systems. |
| Keywords: | early retirement withdrawals, health shocks, income loss, administrative data, life-cycle savings |
| JEL: | H55 I10 D14 D15 J32 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17964 |
| By: | Hu, Bo; Hancock, Ruth; Wittenberg, Raphael; King, Derek; Morciano, Marcello |
| Abstract: | Reforms to the means tests in England for state-financed long-term care were planned for implementation in 2025. They included a lifetime limit (cap) on how much an individual must contribute to their care, with the state meeting subsequent care costs. We present projections of the costs and distributional impacts of these reforms for older people, using two linked simulation models which draw on a wide range of data. We project that by 2038 public spending on long-term care for older people in England would be about 14% higher than without the reforms. While the main direct beneficiaries of the lifetime cap would have been the better off who currently receive no state help with their care costs, the reforms also treated capital assets more generously than the current system, helping people with more modest incomes and wealth. When analysing the impacts of the reforms it is therefore important to consider the whole reform package. Our results depend on a range of assumptions, and the impacts of the reforms would be sensitive to the levels of the cap and other reformed parameters of the means test on implementation. |
| Keywords: | long-term care; older people; charging reform; projected expenditure; distribution analyses |
| JEL: | H51 H53 H75 I18 |
| Date: | 2025–05–14 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127952 |