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on Public Economics |
| By: | Andreas Haufler; Hirofumi Okoshi; Dirk Schindler |
| Abstract: | We study the effects that the introduction of the Global Minimum Tax (GMT) has from the perspective of developing countries. Our model features two asymmetric host countries for FDI that compete with each other for the location of multinational firms, and simultaneously fight profit shifting to a tax haven. The developing country has the weaker enforcement technology to fight profit shifting; it therefore loses more revenue from profit shifting, but also becomes a more attractive location for multinationals. The GMT reduces both profit shifting and the tax-avoidance advantage of the developing country. If tax competition for real investment is sufficiently severe, the introduction of the GMT reduces tax rates and tax revenues in the developing country while tax revenues in the developed country rise. Our results help explaining the opposition of developing countries to the GMT. |
| Keywords: | global minimum tax, developing countries, tax competition |
| JEL: | F23 H26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12329 |
| By: | Janine Dixon; Jason Nassios |
| Abstract: | This study presents updated and extended economy-wide modelling of company income tax reform in Australia, using the VURMTAXG model. Relative to Nassios et al. (2025), this study introduces three extensions: estimates of foreign ownership shares by industry and firm size (these were previously estimated by industry only); the implementation of a Net Cash Flow Tax (NCFT); and consideration of threshold effects of a staged Corporate Income Tax (CIT) schedule under monopolistic competition. We find that a Net Cash Flow Tax displays considerable potential to recoup lost revenue from cuts to the CIT rate, taking pressure off domestic households and reversing losses in gross national income, domestic welfare, real post-tax wages and real private consumption associated with a cut to the CIT rate. Even after accounting for foreign ownership shares by firm size, and productivity losses due to the effects of size thresholds for CIT, the implementation of the full package of CIT cuts funded mainly by a NCFT and residually by personal income taxes is shown to increase gross national income and economic welfare. |
| Keywords: | Taxation policy, CGE modelling, Dynamics, Corporate income tax |
| JEL: | C68 E62 H21 H25 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cop:wpaper:g-361 |
| By: | Jason Nassios; Janine Dixon |
| Abstract: | This paper extends the model of Dixon et al. (2004) by introducing taxes on non-labour income with thresholds into a simple firm-size framework. The modification allows analysis of how threshold-based corporate tax provisions distort firms' output decisions and create deadweight losses. By linking firm counts and average costs to the presence of a tax threshold, the model quantifies the efficiency costs associated with discontinuities in the effective tax schedule. The framework provides a transparent way to assess how threshold policies influence aggregate efficiency without relying on a full general equilibrium setting. |
| Keywords: | Monopolistic competition, Firm entry and scale, Tax efficiency, Tax incidence, Corporate income tax, Thresholds |
| JEL: | H21 H22 H25 L11 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cop:wpaper:g-359 |
| By: | Ken Tabata (School of Economics, Kwansei Gakuin University) |
| Abstract: | Does reducing the corporate income tax while increasing the consumption tax to satisfy government budget constraints improve welfare? To address this question, this paper examines the welfare-maximizing consumption and corporate income tax rates within a Rivera-Batiz and Romer (1991)-type variety-expanding growth model with financial frictions and heterogeneous R&D productivity. We also explore how these welfare-maximizing tax rates change as financial constraints become less binding due to financial development. The results indicate that under mild and plausible levels of financial frictions, relaxing financial constraints on R&D investment lowers the optimal corporate income tax rate, while raising the optimal consumption tax rate. This finding implies that when financial constraints are eased, enhancing innovation at the expense of current production—by raising the consumption tax and reducing the corporate income tax—improves welfare. The underlying mechanism is that relaxing financial constraints induces entry into R&D only by highly productive entrepreneurs, thereby increasing the average efficiency of R&D investment. |
| Keywords: | Financial Frictions, Corporate Income Tax, Consumption Tax, R&D, Endogenous growth |
| JEL: | E62 H21 H25 O30 O38 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:304 |
| By: | Michael Barczay; Shafik Hebous; Fayçal Sawadogo; Jean-Francois Wen |
| Abstract: | Mobile money has become a central digital alternative to traditional banking in developing countries, yet several African governments have introduced taxes on mobile money transactions. We develop a model that characterizes how such taxes affect payment choices and generate excess burden. The model predicts that taxation reduces mobile money use, with elasticities shaped by access to substitutes and transaction costs: banked users substitute into formal alternatives, while unbanked users face higher effective costs, making the tax regressive. Taxation also induces substitution into cash, raising informality. We empirically test these predictions using cross-country survey data and novel transaction-level data from Cameroon, the Central African Republic, and Mali. Results show sharp declines in mobile money usage, with stronger responses among the banked. Unbanked and rural users bear a disproportionate burden. We use the empirical estimates to gauge the excess burden of the tax, which we quantify at 35% of revenue - highlighting its significant efficiency cost alongside its regressive impact. |
| Keywords: | mobile money tax, financial inclusion, transaction tax |
| JEL: | H27 O16 G20 E42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12322 |
| By: | Ana Cebreiro Gomez; Ms. Christina Kolerus; Guilherme Dal Pizzol; Pablo Moreira; Miguel Pecho |
| Abstract: | Brazil’s landmark VAT reform, approved in December 2023, will profoundly alter the way consumption taxes are raised across three levels of government. The dual VAT will replace five overlapping taxes, address major inefficiencies of the current system, and simplify and harmonize a widely scattered tax landscape. While the objective of revenue neutrality is anchored in the reform law, deep structural changes will generate uncertainty about the expected revenue collection. This paper estimates consumption tax revenues under the new VAT based on an adjusted IMF's RA-GAP framework taking into account Brazil’s specificities and documents sectoral shifts in tax burdens. We simulate a wide set of scenarios, modifying key assumptions including on the compliance gap and informality, while being guided by legislated decisions on rates and exemptions. Our findings indicate that minimizing the compliance gap will be the most effective way towards ensuring revenue neutrality. To address revenue risks and unleash the reform’s benefits, full integration of operations and effective management of the input tax credit mechanism are critical. |
| Keywords: | Tax policy; VAT; RA-GAP model; tax compliance; informality |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/266 |
| By: | Sarah S. Baker |
| Abstract: | Does a landlord’s property tax bill affect a new tenant’s rent? According to standard economic theory, it should not — the law of one price implies that identical rental units in the same market should be priced identically, despite heterogeneity in property tax costs. This paper provides new evidence that a landlord’s property tax bill does affect rent for new tenants, violating the law of one price. I investigate the effect of heterogeneous property tax shocks on rents using a unique, quasi-experimental setting in California. California’s Proposition 13 has created large discrepancies in property tax liability among otherwise similar rental units, and these discrepancies are exacerbated quasi-randomly around a sale. Using a novel, comprehensive dataset on new-tenant rents from the City of Berkeley, I find strong evidence that landlords faced with quasi-random, building-level property tax shocks pass through $0.50–$0.89 per $1 of the property tax shock to renters. The results are robust to the inclusion of landlord size, renovations around a sale, and a property’s purchase price. I propose and empirically motivate an explanatory model of heterogeneity in landlord sophistication that can rationalize the observed positive relationship between rent and property taxes. |
| Date: | 2025–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:102287 |
| By: | Viktor Yarovyi |
| Abstract: | This research investigates the impact of tax policy changes on Ukraine's rural economy and local communities during the ongoing war. The study analyses how these reforms balance the need for revenue mobilization with the support of the agricultural sector. A mixed-methods approach combines quantitative fiscal data with qualitative insights from interviews with small-scale farmers. The findings reveal that, while wartime taxation has increased state revenue, its effects have been uneven and often disproportionate. |
| Keywords: | Taxation, War, Smallholder farmers, Local communities, Land tenure, Ukraine |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-105 |
| By: | Yang, Yongwen; Lee, Juhee |
| Keywords: | Environmental Economics and Policy, Public Economics, Political Economy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:344021 |
| By: | Patricio A Barra; Polina Prokof'yeva |
| Abstract: | This technical note presents the Reverse Method, a novel indirect approach for estimating the global value-added tax (VAT) compliance gap. The Reverse Method leverages public datasets and a calibrated econometric model to produce scalable, comparable, and indicative VAT gap estimates for over 100 countries and multiple years. It builds on the IMF’s RA-GAP (Revenue Administration Gap Analysis Program) framework, using C-efficiency, tax expenditure data, and national accounts to approximate the compliance gap as a residual. The methodology enables broad cross-country analysis, supports tax gap benchmarking, and provides indicative estimates even where detailed data is scarce. While not a substitute for country-specific RA-GAP assessments, the Reverse Method offers a practical tool for monitoring global VAT compliance trends, informing tax gap analysis, and facilitating international comparisons. Its results highlight differences by income level and region, and the approach is designed for continuous improvement as more data becomes available. |
| Date: | 2025–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imftnm:2025/015 |
| By: | Ayoki, Milton |
| Abstract: | Since 2003, the West African Economic and Monetary Union (WAEMU) and Central African Economic and Monetary Community (CEMAC) have implemented binding directives to harmonize mining tax regimes and eliminate fiscal competition. Yet, we observe a proliferation of mine-specific stability clauses—contractual provisions that freeze tax rates for 20-30 years—in response to these coordination efforts. Analyzing 47 mining contracts across 12 WAEMU and CEMAC countries (2010-2023), this paper identifies a Stability Clause Paradox: instruments designed to provide tax certainty have become the primary vehicle for undermining regional tax coordination. Our results show that mines with stability clauses face effective tax rates that are 18-23 percentage points lower than statutory rates, creating a dual fiscal regime that coordination cannot reach. Our theoretical model demonstrates that stability clauses act as commitment devices in tax competition, locking in race-to-the-bottom dynamics for decades. The paper provides the first empirical evidence that regional tax coordination in Africa is systematically circumvented through contractual tax stabilization, with immediate implications for WAEMU's ongoing mining code reforms and CEMAC investment policy reviews. |
| Keywords: | Tax competition, regional integration, stability clauses, WAEMU, CEMAC, extractive sector, tax coordination, mining contracts |
| JEL: | H25 H77 O13 O17 Q38 |
| Date: | 2025–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127203 |
| By: | Massenz, Gabriella (Research Institute of Industrial Economics (IFN)) |
| Abstract: | What leads self-employed entrepreneurs to incorporate? I examine how tax incentives interact with the cost of incorporation to answer this question. I exploit the abolition of minimum capital requirements to set up a limited liability company in the Netherlands and compare entrepreneurs that differ in their incentive to incorporate but that are otherwise comparable. After the reform, entrepreneurs whose pre-reform taxable income was closest to a kink where marginal personal income tax rates steeply increase are more likely to start a corporation. Total tax paid by these entrepreneurs is significantly reduced, which suggests they are able to reap the tax benefits of conducting business activity as a corporation. However, there seems to be no significant impact on total business activity – at least in the short term. Finally, there appears to be no significant difference in the probability that business owners own an unincorporated business, which suggests that many entrepreneurs operate a corporation alongside an unincorporated firm. |
| Keywords: | Incorporation; Organizational form; Minimum capital requirements; Income shifting |
| JEL: | H25 H26 H32 |
| Date: | 2025–12–16 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1547 |
| By: | Laurent Bach (ESSEC Business School); Antoine Bozio (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris); Arthur Guillouzouic (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Clément Malgouyres (IPP - Institut des politiques publiques, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We link French households' tax records to the corporations they control, and build a payout-policy–neutral income measure, with corresponding tax burdens including those of "billionaires": the top 0.0002%. De- fined as such, income is more concentrated than taxable income, it better predicts rich-list membership, and persists more among billionaires. Personal taxes remain progressive until the top 0.1%, but eventually decline to 2% of income. Corporate taxes are an imperfect progressive backstop, as total tax rates fall from 45% at the 0.1% threshold to 25% for billionaires. Among these, the tax burden is global and tax-efficient pyramidal control over businesses ubiquitous. |
| Keywords: | Corporate tax, Business Income, Tax progressivity, Income distribution |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:ipppap:hal-05423119 |
| By: | Tervala, Juha; Puonti, Päivi |
| Abstract: | Abstract The chronic fiscal deficits of Finland and the continuous increase of the public debt-to-GDP ratio are likely to require further fiscal consolidation through cuts of public expenditure and increases of taxation. Although contractionary fiscal consolidation measures reduce the level of GDP in the short term, their effects may vary across categories of expenditure and taxation. The prolonged weakness of economic growth has further undermined the sustainability of the public finances of Finland, which in turn highlights the need for consolidation measures that minimise the losses of output. This literature review examines fiscal multipliers as support for the design of growth-friendly consolidation strategies. This analysis pays special attention to the impact of Finland’s economic structure on the size of fiscal multipliers, with the objective of producing policy-relevant evidence. |
| Keywords: | Fiscal consolidation, Fiscal policy, Fiscal multiplier, Fiscal sustainability, Macroeconomic policy |
| JEL: | E62 E63 H30 |
| Date: | 2025–12–16 |
| URL: | https://d.repec.org/n?u=RePEc:rif:report:171 |
| By: | Sita Slavov |
| Abstract: | This paper presents evidence suggesting that delayed Social Security claiming by husbands – resulting in an actuarially enhanced benefit – attenuates the financial shock of widowhood for their wives. Under Social Security survivor benefit rules, primary earners (usually husbands) pass on the actuarial adjustments from delayed claiming to their surviving spouses. Using a staggered difference-in-differences approach, I find women whose husbands delayed claiming to full retirement age or later face a post-widowhood increase of 6.9 percentage points in the probability of falling below the 5th percentile of the pre-widowhood income distribution. This effect is almost 12 percent smaller for each year of delayed claiming by the husband (though the attenuation is concentrated in the first 4 years of widowhood). The general findings are robust to instrumenting for the husband’s claiming age using the loosening of the retirement earnings test in 2000 – a policy change that incentivized earlier claiming. |
| JEL: | D14 H55 J26 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34612 |
| By: | Hamish W. Low; Costas Meghir; Luigi Pistaferri; Alessandra Voena |
| Abstract: | The 1996 U.S. welfare reform introduced time limits on welfare receipt. We use quasi-experimental evidence and a rich life cycle model to understand the impact of time limits on different margins of behavior and well-being. We stress the impact of marital status and marital transitions on mitigating the cost and impact of time limits. Time limits cause women to defer claiming in anticipation of future needs and to work more, effects that depend on the probabilities of marriage and divorce. They also cause an increase in employment among single mothers and reduce divorce, but their introduction costs women 0.7% of lifetime consumption, gross of the redistribution of government savings. |
| Keywords: | Welfare; Welfare reform; Limited commitment |
| JEL: | D91 H53 J12 J21 |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:102278 |