|
on Public Economics |
| By: | Kastoryano, Stephen (University of Reading) |
| Abstract: | This paper reveals how tax complexity, in the form of loopholes and assets overlapping different sections of tax returns, contributes to tax avoidance and evasion. Using administrative data from the Netherlands, it shows how an auditing announcement in 2005 triggered large increases in declared assets and properties, predominantly held by the wealthiest segments of society, in unexpected sections of the tax returns. It further takes advantage of a one-year reduction in the dividend tax rate, which coincided with another auditing announcement in 2007, to more specifically assess strategic spontaneous declarations and shifting among shareholders, particularly those with substantial company holdings. The results highlight taxpayer contingency plans and opportunistic behaviour when declaring previously hidden wealth. They also emphasize how the ambiguity of certain assets' classifications can be coopted to strategically shift wealth in response to new tax policies. |
| Keywords: | tax complexity, tax evasion, tax avoidance, auditing announcements |
| JEL: | H26 H83 K34 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17722 |
| By: | Batabyal, Amitrajeet; Beladi, Hamid |
| Abstract: | We analyze a stylized creative region populated by three groups of individuals: the elites who hold political and taxing power, the entrepreneurial creative class that produces a knowledge good, and workers. Political competition between the elites and the creative class results in the elites levying distortionary taxes on the creative class. We provide a rationale for this kind of taxation and then present two results. First, we demonstrate that this kind of distortionary taxation reduces the equilibrium growth rate of the economy of our creative region. Second, we explain why this negative result arises. |
| Keywords: | Creative Class, Distortionary Tax, Elite, Political Competition |
| JEL: | H21 R11 |
| Date: | 2024–11–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123673 |
| By: | Dourado, Ana Paula; Müller, Jessica; Rangel, Leidson; Spengel, Christoph |
| Abstract: | This paper examines the legal consequences and assesses the economic impact of the differing tax treatment of investment funds in Portugal, Germany, and Luxembourg before and after the Allianzgi-Fonds case decision. Before the Allianzgi-Fonds case decision the Portuguese investment taxation discriminated against foreign investments by levying a withholding tax compared to domestic ones. As a result of the Allianzgi- Fonds landmark case, our paper examines whether the Portuguese CIT-exemption extended to non-resident UCITS will lead to tax neutrality treatment of investment funds in the EU. Overall, we confirm that the abolishment of the discriminatory withholding tax can considerably reduce the effective tax levels for cross-border investments. Moreover, the abolishment also diminishes the domestic investment bias. Nonetheless, the results do not confirm the achievement of neutrality. |
| Keywords: | European Court of Justice, Funds, Investor, Taxation, Portugal |
| JEL: | H24 H25 K34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312198 |
| By: | Garriga, Pablo; De Gouvea Scot De Arruda, Thiago |
| Abstract: | This paper studies how firms respond t o differential, size-based tax rates using administrative tax data in Lithuania. Exploiting a notch in the tax schedule faced by corporations, it documents strong behavioral responses to tax incentives— revenue elasticity is estimated at 0.35 and cost elasticity at −1.3, implying a large total profit elasticity of 7.4. It then leverages the panel structure of the data to provide insights on the dynamic effects of these tax incentives. Firms located close to but below the notch report systematically lower revenue growth in the short term, but the effects dissipate over time. |
| Date: | 2023–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10500 |
| By: | Thomas, Alastair Geoffrey Arthur |
| Abstract: | In addition to raising revenue, tax systems have a key role to play in achieving countries’ equity goals. An important first step in assessing whether a particular tax system is appropriately supporting those equity goals is to assess the degree of progressivity of the tax system. However, measuring the progressivity of a tax system is challenging for several reasons. Most significantly, data limitations have a large impact on what taxes can be examined, what measurement approaches can be adopted to examine those taxes, and how reliable those approaches are likely to be. This is particularly important for low-income countries where data limitations are typically most significant. Furthermore, there is no single definition of progressivity, or single method for measuring the degree of progressivity of a tax—thereby necessitating a range of decisions and value judgements to be made in any analysis. This paper examines and assesses the potential approaches that may be adopted to measure the progressivity of tax systems, and proposes a set of metrics to assess tax progressivity in low-income International Development Association (IDA) countries. |
| Date: | 2023–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10460 |
| By: | Keen, Michael; Liu, Li; Pallan, Hayley Marie |
| Abstract: | This paper articulates and, using newly-assembled data, explores how international taxation affects aggregate tangible cross-border investment. Spillovers from statutory tax rates abroad seem: As sizable as effects from the host’s rate; larger than previous consensus values (attributed to a systematic bias from FDI data); and consistent with ‘implicit’ profit shifting through real investment (rather than ‘paper’ profit shifting). Contrary to much policy discussion, the results also imply that: Host countries’ marginal effective tax rates have at best a weak effect on real investment; those elsewhere have none; and, applied to the prospective global minimum tax, inward tangible investment in most sample countries will increase. |
| Date: | 2023–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10427 |
| By: | Dinerstein, Marcos; Patino Pena, Fausto Andres |
| Abstract: | This paper quantifies the impact of effective corporate tax rates on aggregate total factor productivity. Using Chilean manufacturing data, the paper documents a large dispersion in the effective tax rate faced by firms and a mass of firms facing a 0 percent tax rate. These empirical patterns are incorporated into a standard monopolistic competition model with corporate tax rates. The paper’s quantitative findings show that the TFP gains between the economy implied by the Chilean tax code of 1998–2007 and a hypothetical economy without effective corporate tax rate inefficiencies are between 4 and 11 percent. The paper considers counterfactual policies in which all firms face the same tax rate and finds a monotonically decreasing relationship between the level of the tax rate and total factor productivity. |
| Date: | 2023–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10394 |
| By: | Collin, Matthew Edward |
| Abstract: | This paper estimates the policy and economic impacts of a European Union–led effort to review and “blacklist” jurisdictions based on their compliance with international standards designed to curb corporate profit shifting and private tax evasion. Using a combination of regression discontinuity and difference-and-difference methods, there is evidence of only limited improvements in tax governance four years after the inception of the list. There is also no clear evidence that the listing exercise had any impact on offshore wealth or shifted profits, largely because the bulk of jurisdictions that host both of these were not targeted by the European Union. The results suggest that “coercive” efforts to reduce global tax evasion and avoidance will struggle without better targeting and enforcement. |
| Date: | 2023–05–04 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10435 |
| By: | Pierluigi, Angelino; Czarnitzki, Dirk; Hovdan, Brigitte |
| Abstract: | Drawing on a longitudinal database of Belgian firms over the years 2014-2020, this study investigates the joint effect of R&D grants and R&D tax credits on R&D inputs and innovation outputs. We estimate Conditional Difference-in-Difference (CDiD) models and apply both treatment effects estimators that account for heterogeneous, staggered treatments as well as standard two-way fixed effects DiD estimators. We find positive treatment effects for both grants and tax credits on R&D employment, R&D employment intensity, and total R&D expenditures. R&D tax credits have a significant positive impact on the share of sales of new or improved products. By comparing the results obtained by the two econometric methods, we also find that the standard two-way fixed effects models may lead partially to potentially wrong conclusions about the impacts of such policies, as the traditional estimators may not sufficiently account for the complexity of how the policy instrument affect firm-level outcomes. |
| Keywords: | Policy mix, innovation, R&D grants, R&D tax credits, difference-in-difference |
| JEL: | D22 H25 L53 O32 O38 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312192 |
| 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. |
| Date: | 2023–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10546 |
| By: | Isaak, Niklas; Jessen, Robin |
| Abstract: | How much does society value redistribution? The common method to derive inverse-optimum welfare weights is by inverting an optimal-tax model. Our alternative imposes fewer restrictions on labor supply and enables comparisons across household types. We use a structural labor supply model to calculate the marginal value of public funds for various small tax reductions, directly linked to welfare weights. An application to Germany finds: i) The tax-transfer system is optimal if society values one additional Euro for the bottom decile three times as much as for the median. ii) At low-medium incomes, weights for couples exceed those for singles substantially |
| Abstract: | Wie viel Wert legt die Gesellschaft auf Umverteilung? Die übliche Methode zur Ableitung von invers-optimalen Wohlfahrtsgewichten besteht in der Umkehrung eines Modells mit optimaler Besteuerung. Unsere Alternative unterwirft das Arbeitsangebot weniger Beschränkungen und ermöglicht Vergleiche zwischen verschiedenen Haushaltstypen. Wir verwenden ein strukturelles Arbeitsangebotsmodell, um den Grenzwert der öffentlichen Mittel für verschiedene kleine Steuersenkungen zu berechnen, die direkt mit Wohlfahrtsgewichten verbunden sind. Eine Anwendung auf Deutschland zeigt: i) Das Steuertransfersystem ist optimal, wenn die Gesellschaft einen zusätzlichen Euro für das unterste Dezil dreimal so viel wertschätzt wie für den Median. ii) Bei niedrigen bis mittleren Einkommen übersteigen die Gewichte für Paare die für Singles erheblich. |
| Keywords: | Inverse optimum, microsimulation, marginal value of public funds, social welfare function, optimal taxation, labor supply, efficiency |
| JEL: | H21 H31 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:311299 |
| By: | Öner, Cihat (Tilburg University, School of Economics and Management); Garcia Anton, Ricardo (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:4a730696-713e-4e8f-820d-574ff0db346d |
| By: | Vîntu, Denis |
| Abstract: | This study examines how fiscal policy affects the economy in order to assess the degree of uncertainty around public finances. The Financial Approach focuses on the collection and utilization of private property by public administration. The title of this paper indicates that it deals with dynamic tax policy concerns. These include the relationship between long-term expectations and short-term outcomes, the impact of fiscal policy on capital formation, economic development, and intergenerational equity, and the extent to which current policies impede the introduction of potential future policies. Dynamic analysis has recently surpassed static analysis in a number of economic fields. It is appropriate to focus on the monetary strategy in particular because it has been modified and adjusted over time in the Republic of Moldova. These adjustments are frequently made beforehand, while they occasionally take into account the present financial situation when it wasn't mentioned before. It should not be shocking that financial variables are always shifting. The direction of the economy is affected by the current policy changes, which ineluctably call for other policy adjustments in the future. The expectation of these future adjustments, however, also has an impact on the current outcomes since it ensures that the consequences of past monetary actions remain, even in the absence of the entire future financial arrangement. |
| Keywords: | fiscal policy, budget fiscal deficit, primary account deficit, value-added tax, taxation. |
| JEL: | E3 E37 H3 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123504 |
| By: | Raluca Pavel; Bernur Acikgoz (IKCU - Izmir Katip Celebi University); Jean‐christophe Poudou (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | We investigate the effects of retroactive audits and varying statutes of limitations on tax compliance through a laboratory experiment. First, we solve a dynamic model using Bellman's solution to show that longer limitation periods promote compliance by raising expected penalties, as each past period carries a higher probability of inspection. Second, in our experiment, we manipulate the statute of limitations (0, 1, 3, and 6 periods), providing data that support the model's predictions. Our data also suggest that a 3-year statute of limitation optimally balances compliance benefits with administrative efficiency.This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. |
| Keywords: | laboratory experiment, retroactive audits, statute of limitations |
| Date: | 2025–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04937321 |
| By: | Stanley, L. Winter; Stanley L. Winer |
| Abstract: | Although reassignment of policy instruments among governments in many federations is a recurring event, there is no widely accepted, positive model of the phenomenon. This stands in contrast to the well established body of work on the normative theory of the efficient federal assignment. In this paper, I study reassignment of the power to tax in the Canadian federation by considering three elements that are likely to be part of any complete, positive analysis. These are: the facts that characterize the fiscal history of reassignment in the Canadian federation; the logic behind the demand for tax and other instruments by provincial and national governments; and the analysis of intergovernmental trade in governing instruments, which adds the supply of instruments and closes the model. While the story I tell is constructed to deal with the Canadian case, I hope that some of the ideas and issues I raise will generalize. |
| Keywords: | federal constitution, reassignment, demand and supply of governing instruments, power to tax, political competition, fiscal history, Canadian fiscal federalism |
| JEL: | H10 H77 D72 D78 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11678 |
| By: | Lara Ibarra, Gabriel; Cabrera, Maynor Vinicio; Canozzi Conceicao, Otavio; Campante Cardoso Vale, Ricardo |
| Abstract: | This paper investigates the impacts of the Brazilian fiscal system on poverty and inequality, with a focus on the effects on vulnerable populations. Leveraging a broadly applied and accepted methodology and several household surveys and administrative data, the paper shows that Brazilian fiscal policies in 2019 were typically poverty- and inequality-reducing, but with a large heterogeneity in the effectiveness of fiscal tools. The poverty impacts of fiscal policies increased over time due to direct transfers. Income inequality reduction is among the highest in a comparable set of middle-income countries, yet the post-fiscal Gini is still high at 0.521. The results indicate that elderly people are the largest beneficiaries of the fiscal system and households with children experience a smaller decline in poverty from government transfers compared to those with no children. At the individual level, the findings also show that children and young adolescents (ages 0–15) were made poorer after taxes and transfers, which suggests that Brazilian fiscal policies in 2019 also increased poverty rates for some population groups. These findings contribute to provide a comprehensive overview of the fiscal system in Brazil and have wide-ranging consequences for the formulation of public policies. |
| Date: | 2023–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10495 |
| By: | Baldassarre, Alessio; Calà, Valerio Ferdinando; Carullo, Danilo; Dudu, Hasan; Fusco, Elisa Marie; Giacobbe, Pasquale; Orecchia, Carlo |
| Abstract: | The main goal of regional computable general equilibrium models is to analyze how different regions within a specific area react to certain shocks. Therefore, countries with high heterogeneity among regions, like Italy, constitute an interesting case study for regional computable general equilibrium model analysis. This paper presents the regional part of the new (recursive) dynamic single-country computable general equilibrium model called the Italian Regional and Environmental Computable General Equilibrium of the Department of Finance, based on the Mitigation, Adaptation and New Technologies Applied General Equilibrium model of the World Bank. A new regional social accounting matrix for Italy (20 regions at the Nomenclature of territorial units for statistics level) has been constructed. The social accounting matrix is used as input data to simulate the abolition of the regional tax on productive activities (regional business tax) through three different scenarios, focusing on the effects on gross domestic product, regional value added, and welfare. The results show that under the modeling assumptions, the complete abolition of the regional tax on productive activities would positively impact Italian economic growth and regional welfare. |
| Date: | 2023–03–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10387 |
| By: | Jessen, Jonas; Jessen, Robin; Gałecka-Burdziak, Ewa; Góra, Marek; Kluve, Jochen |
| Abstract: | We quantify micro and macro effects of changes in the potential benefit duration (PBD) in unemployment insurance. In Poland, the PBD is 12 months for the newly unemployed if the previous year's county unemployment rate is more than 150% of the national average, and 6 months otherwise. We exploit this cut-off using regression discontinuity estimates on registry data containing the universe of unemployed from 2005 to 2019. For those whose PBD is directly affected by the policy rule, benefit recipients younger than 50, a PBD increase from 6 to 12 months leads to 13 percent higher unemployment (the micro effect). The aggregate effect on unemployment (the macro effect, which includes equilibrium effects) is entirely explained by this increase. We find no evidence of spill-overs on two distinct groups of unemployed whose PBD is unchanged and no effect on measures of labour market tightness. We cannot reject that the micro effect equals the macro effect. A decomposition analysis reveals that 12 months after an increase in the PBD, changes in exits from and entries into unemployment each contribute to about half of the overall increase in unemployment. |
| Abstract: | Wir quantifizieren die Mikro- und Makroeffekte von Änderungen der maximalen Bezugsdauer der Arbeitslosenversicherung. In Polen beträgt die PBD für neu Arbeitslose 12 Monate, wenn die Arbeitslosenquote des Vorjahresbezirks mehr als 150 % des nationalen Durchschnitts beträgt, und ansonsten 6 Monate. Wir nutzen dies Variation unter Verwendung von Regressionsdiskontinuitätsschätzungen für Registerdaten, die die Gesamtheit der Arbeitslosen von 2005 bis 2019 enthalten. Für diejenigen, deren maximale Bezugsdauer direkt von der politischen Regelung betroffen ist, d. h. für Leistungsempfänger unter 50 Jahren, führt eine Erhöhung der maximalen Bezugsdauer von 6 auf 12 Monate zu einer um 13 % höheren Arbeitslosigkeit (der Mikroeffekt). Der Gesamteffekt auf die Arbeitslosigkeit (der Makroeffekt, der Gleichgewichtseffekte beinhaltet) wird vollständig durch diese Erhöhung erklärt. Wir finden keine Anzeichen für Spillover-Effekte auf zwei verschiedene Gruppen von Arbeitslosen, deren maximale Bezugsdauer unverändert bleibt, und keine Auswirkungen auf Messgrößen für die Anspannung des Arbeitsmarktes. Wir können nicht zurückweisen, dass der Mikroeffekt dem Makroeffekt entspricht. Eine Dekompositionsanalyse zeigt, dass 12 Monate nach einer Erhöhung der maximalen Bezugsdauer die Veränderungen bei den Abgängen aus der und den Zugängen in die Arbeitslosigkeit jeweils etwa zur Hälfte zum Gesamtanstieg der Arbeitslosigkeit beitragen. |
| Keywords: | Unemployment benefits, extended benefits, spell duration, separation rate, regression discontinuity |
| JEL: | H55 J20 J65 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:311189 |