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on Public Economics |
| By: | Eric Fabri |
| Abstract: | Abstract Why and how should we tax inheritances, gifts, and bequests? This article examines the political theory debate on inheritance taxation and identifies four main arguments and three objections in favor of and against it. It reviews the most common forms of inheritance taxation in OECD countries and proposes an alternative: a lifetime capital accessions tax. This alternative is broadly delineated to compare it with the “average inheritance tax” and assess which of these two options better meets the requirements of the arguments and objections previously stated. The analysis shows that the capital accessions tax is normatively superior to the average inheritance tax. It better satisfies the reasons we have for taxing intergenerational wealth transfers and offers strong replies to three classical objections to inheritance taxation. Discussing the details of the accessions tax allows us to show how it can respond to popular objections to inheritance taxation and gain popular support. |
| Keywords: | Capital accesions tax; Philosophy of taxation; Wealth Transfers; Inheritance; Gift; Bequest; John Stuart Mill; Inheritance taxation |
| JEL: | H20 D31 H29 |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/396620 |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Riccardo Secomandi (University of Ferrara & IEB) |
| Abstract: | We examine how information influences the marginal willingness to pay taxes (MWTPT) through a four-wave randomized survey experiment conducted during the COVID-19 pandemic. Specifically, we assess the impact of quantitative (data on the actual tax-to-GDP ratio) and qualitative (basic pros and cons of taxation) information on revealed MWTPT. The results show that qualitative information increases MWTPT, particularly among high-income individuals. In contrast, quantitative information only reduces MWTPT among high-income individuals who initially underestimated the aggregate tax burden. Hence, those who are potentially more affected by taxes are also more sensitive to the provision of information. These findings suggest that information can shape perceptions of the tax system and, consequently, influence individuals' willingness to contribute to public good provision. This has important implications for tax policy design and efforts to reduce political polarization. If these efforts are not properly implemented, the revealed price of democracy will remain biased. |
| Keywords: | Survey experiment, Fiscal knowledge, Marginal Willingness to Pay Taxes, Income based behaviour |
| JEL: | D72 D91 H20 H26 H30 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ieb:wpaper:doc2025-04 |
| By: | Batabyal, Amitrajeet |
| Abstract: | In this note, we provide the first game-theoretic analysis of taxation and tax shifting when tanneries in Kanpur, India, that produce leather and pollute the Ganges River are taxed. We model the n≥2 tanneries as a Cournot oligopoly and a specific tax τ>0 is imposed on each unit of leather produced by the polluting tanneries. We first determine the symmetric Nash equilibrium output of leather and its price with the tax. Second, we show that the rate of tax shifting by the polluting tanneries is constant. Third, we discuss how increasing either the number of tanneries or the price elasticity of demand affects the tax shifting that takes place. Finally, we comment on the policy implications of constant tax shifting such as the predictability of the incidence of the tax burden. |
| Keywords: | Ganges River, Tannery, Specific Tax, Tax Shifting, Water Pollution |
| JEL: | H22 H23 Q25 |
| Date: | 2025–02–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126594 |
| By: | Sauer, Radek (Central Bank of Ireland, CESifo) |
| Abstract: | This paper analyzes the macroeconomic impact of corporate taxation. The analysis is conducted in a quantitative two-country model. First, the paper describes the long-run effects of corporate taxation. A reduction in the corporate-income tax rate increases GDP, wages, consumption, investment, and business density. The trade balance is at the same time negatively affected. Firms headquartered in a country which lowers its corporate tax become internationally less active and instead focus more on their domestic market. Next, the paper examines transitional dynamics that are induced by a corporate-tax reform. The short-run response of the economy can substantially differ from the long-run response. Finally, the paper investigates the effects of international profit shifting in high-tax and low-tax jurisdictions. |
| Keywords: | corporate taxation, macroeconomy, heterogeneous firms, multinationals, international spillovers, profit shifting. |
| JEL: | E62 F42 H25 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:12/rt/25 |
| By: | Tanya Bandula-Irwin |
| Abstract: | Conventional portrayals of armed group taxation emphasize ad hoc and unpredictable schemes, yet many insurgents construct surprisingly state-like fiscal systems. This paper explains when and why armed groups institutionalize taxation—developing hierarchies, codified rules, dedicated offices, and internal enforcement—rather than relying on ad hoc extraction. I argue that institutionalization is primarily an adaptive response to a binding revenue imperative, conditional on sufficient organizational capacity. |
| Keywords: | Armed conflict, Taxation, Insurgency, Statebuilding, Fiscal capacity, Philippines |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-89 |
| By: | Joel Slemrod |
| Abstract: | Taxation based on identity has a long, often sordid history, and persists to this day, usually with some subtlety. It is a relatively tame cousin of the blatant, violent, and genocidal policies that have targeted people of certain religions, races, and genders for millennia. It is, nevertheless, an issue to be confronted rather than ignored by public finance economists. This is especially true because the concept of identity played a prominent role in the US presidential election of 2024, and is likely to be at least an undercurrent to the policy debates beginning in 2025, including those concerning tax policy. Tax based on identity is difficult, although not impossible, to justify within standard optimal tax analysis, because in that framework the policy objective is usually framed as being anonymous (impartial) and eschews basing policy on disparate preferences. The most promising justification seems to be if, for example, race is systematically correlated with the failure of income to represent ability to pay. It then acts as a tag that can help achieve the desired allocation of tax burden at minimal efficiency cost. For unjustified identity-based tax policy, analysis can help to spot its existence and quantify its social welfare cost. |
| JEL: | H20 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34476 |
| By: | Ana Luiza Nabuco (Cedeplar/UFMG and EHESS); Luiza A. Paixão (IBGE); Marcelo de B. Brandão (consultor independente); Renan P. Almeira (Cedeplar/UFMG) |
| Abstract: | This article presents a pioneering estimate of tax evasion on residential rental income in Brazil. The topic gains importance amid transformations in real estate markets and the global rise in families living in rented homes. Results are based on the cross-referencing of three databases: unprecedented access to Federal Revenue records (DIMOB), the Demographic Census, and the Family Budget Survey (POF). Tax evasion is measured through two indicators: tax evasion and contractual informality, both showing extremely high levels in terms of the number of rentals and the value of income. Strong regional heterogeneity is observed, with higher rates in capitals of the North, Northeast, and Central-West regions and in the country’s interior. In capitals alone, about 3.7 million rental properties are not reported to tax authorities. These findings raise important debates on income and property inequality, given the concentration of rental income among high-income groups and the significant share of rent payments made by low-income households. The potential for additional tax revenue is considerable: undeclared rental income is estimated between R$65 and R$215 billion annually. Informal rentals thus represent the prevailing pattern in Brazil, revealing a significant and often overlooked dimension of the informal economy. |
| Keywords: | tax evasion, taxation, rent, real estate market, informality |
| JEL: | H2 H24 H26 R21 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cdp:texdis:td687 |
| By: | Esteban García-Miralles (BANCO DE ESPAÑA); Maximilian Freier (EUROPEAN CENTRAL BANK); Sara Riscado (OECD); Chrysa Leventi (EUROPEAN COMMISSION); Alberto Mazzon (EUROPEAN COMMISSION); Glenn Abela (CENTRAL BANK OF MALTA); Laura Boyd (CENTRAL BANK OF IRELAND); Baiba Brusbarder (LATVIJAS BANKA); Marion Cochard (BANQUE DE FRANCE); David Cornille (NATIONAL BANK OF BELGIUM); Emanuele Dicarlo (BANCA D’ITALIA); Ian Debattista (CENTRAL BANK OF MALTA); Mar Delgado-Téllez (BANCO DE ESPAÑA); Mathias Dolls (IFO INSTITUTE); Ludmila Fadejeva (LATVIJAS BANKA); Maria Flevotomou (BANK OF GREECE); Florian Henne (BANQUE CENTRALE DU LUXEMBOURG); Alena Harrer-Bachleitner (OFFICE OF THE AUSTRIAN FISCAL COUNCIL); Viktor Jaszberenyi-Kiraly (MAGYAR NEMZETI BANK); Max Lay (IFO INSTITUTE); Laura Lehtonen (DE NEDERLANDSCHE BANK); Mauro Mastrogiacom (DE NEDERLANDSCHE BANK); Tara McIndoe-Calder (CENTRAL BANK OF IRELAND); Mathias Moser (OESTERREICHISCHE NATIONALBANK); Martin Nevicky (NATIONAL BANK OF SLOVAKIA); Andreas Peichl (IFO INSTITUTE); Myroslav Pidkuyko (BANCO DE ESPAÑA); Mojca Roter (BANKA SLOVENIJE); Frédérique Savignac (BANQUE DE FRANCE); Andreja Strojan Kastelec (BANKA SLOVENIJE); Vaidotas Tuzikas (LIETUVOS BANKAS); Nikos Ventouris (BANK OF GREECE); Lara Wemans (BANCO DE PORTUGAL) |
| 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 and 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, through either 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. |
| Keywords: | personal income tax, inflation, indexation, bracket creep |
| JEL: | D31 H24 E62 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2545 |
| By: | Keshav Choudhary; Bhanu Gupta |
| Abstract: | Traditional tax audits are effective at raising revenue but are costly to scale. Can third-party auditors enhance compliance, or are they prone to collusion due to inherent conflicts of interest? We study a policy reform in India that introduced unanticipated changes in the revenue threshold for mandatory third-party audits. Using a combination of bunching and difference-in-differences methods on administrative data, we estimate that third-party audits can increase tax payments by around 45%, on average. However, firms with income or expenses already subject to third-party reporting exhibit smaller responses to private audits, reflecting a lower scope for manipulation. Our findings suggest that extending third-party audit requirements to smaller firms below the current threshold may be a cost-effective approach to increasing compliance in low state capacity settings. |
| Keywords: | Third-party audit, Corporate tax, Evasion, Bunching |
| JEL: | H26 H32 M42 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2025-04 |
| By: | Brun Lidia (European Commission - JRC); Stoehlker Daniel (European Commission - JRC); Pycroft Jonathan; Van't Riet Maarten |
| Abstract: | "We assess the welfare implications of the Global Minimum Tax (GMT) on corporate income in a multi-country macroeconomic model. The objectives of the GMT are to mitigate harmful tax competition and to curb wasteful profit shifting. The theoretical literature suggests that the welfare effects of the GMT are ambiguous. It contributes positively to welfare by improving tax revenues and limiting profit shifting; however, it may also raise firms' capital costs, exerting a contractionary effect on the economy. Using our applied model, we combine all these effects to produce numerical welfare results, creating what we believe is the first comprehensive and quantitative welfare assessment of the GMT. We simulate the implementation of a GMT of 15 percent by all countries in our model, which are the 27 EU Member States, the US, the UK, Japan, and a tax haven. We measure the welfare change in two scenarios. In the first, additional corporate income tax (CIT) revenues are redistributed as direct transfers to households. This produces mixed welfare results across countries, while the global welfare impact is slightly positive. In the second, additional CIT revenues are redistributed back to firms as lower CIT rates, provided that the rate remains at or above the GMT rate. In most countries, the reduction in the cost of capital from a lower CIT rate more than offsets the increase caused by reduced profit shifting, stimulating economic activity. Positive welfare outcomes are widely, though not universally, experienced, leading to a modest increase in global welfare. We investigate the impact of alternative GMT rates, finding that a 16 percent GMT rate yields the highest level of global welfare in our model." |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202504 |
| By: | Shane Domican; Sijin Zhang (The Treasury) |
| Abstract: | Population ageing, income growth, and individuals shifting income into companies and trusts has materially changed New Zealand’s tax bases and revenue. We provide indicative analysis of these trends and four main insights: (1) An ageing population may result in an increase in GST revenues as older households spend their saved earnings. This could shift our tax base towards indirect taxes, however the size of this is relatively small. In addition, this result critically relies on assuming no behaviour change from households due to ageing. (2) On the other hand, there have been material behavioural changes. We show that there has been a rise in the ‘labour’ share of our personal tax base that is likely due to rising labour force participation, particularly by older individuals. We also show how, absent this rise in labour income from rising participation, an ageing population would have increased the ‘capital’ share of our personal tax base. (3) Fiscal drag has been significant as income growth moved more income into higher personal tax brackets. From 2011 to 2023, fiscal drag led to personal tax revenues rising by 1.6% of GDP. The distributional impact of fiscal drag is uneven and the full impact on New Zealanders depends on how the revenue is used. However, in the future, if fiscal drag continues, it’s likely to increasingly impact lower income individuals. (4) Taxpayers appear to have responded to gaps between the top personal tax rate and the entity tax rate by shifting more of their income into companies and trusts. This had a material and growing fiscal impact. The risk of sheltering in trusts has largely been removed with the alignment between top personal tax rate and trustee rate in 2024. However, there appears to have been growing sheltering in companies, indicating a potential shift in risk. We also show how this sheltering may explain some of the apparent rise in labour income for individuals as capital income is sheltered in these entities. Whether these trends continue in the future is uncertain. Our analysis shows that behavioural responses by taxpayers as well as future policy choices are key drivers of our tax bases and revenue. We hope the note highlights areas to have continued attention and vigilance. |
| JEL: | H20 D31 D33 |
| Date: | 2025–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:nzt:nztans:an25/07 |
| By: | Kauhanen, Antti; Ropponen, Olli |
| Abstract: | Abstract High-skilled immigration has consistently demonstrated positive effects on firm performance, innovation, and productivity, while generally avoiding adverse impacts on native wages or employment. Consequently, many countries offer preferential tax schemes for highly skilled migrants. Recent research from the Netherlands provides compelling evidence on the impact of such schemes. In 2012, the Dutch system underwent reform, replacing a subjective “scarce skills” eligibility criterion with a transparent and relatively low income threshold. This reform significantly increased migration among mid-level earners, illustrating that migration reacts strongly to increased net-of-tax income and underscoring the importance of clear, predictable rules. We suggest that Finland should extend tax relief for highly skilled immigrants beyond the highest earners and consider implementing graduated rates. |
| Keywords: | Skilled Immigration, Preferential Tax Scheme, Migration Elasticity, Key Employee Act, Finland, Netherlands |
| JEL: | J61 J31 D24 O31 |
| Date: | 2025–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:168 |
| By: | Sanjeev Gupta (Center for Global Development); Ainhoa Petri-Hidalgo (Center for Global Development) |
| Abstract: | Noncommunicable diseases (NCDs) impose immense health and economic costs worldwide, with a disproportionate burden on low- and middle-income countries. Excise taxes on tobacco, alcohol, and sugar-sweetened beverages (SSBs) are recognized as an effective policy instrument that both curbs consumption and mobilizes public revenue. Yet, actual collections fall far below potential. This paper reviews 15 years of International Monetary Fund (IMF) policy advice on health taxes (2010–2024) across bilateral surveillance, lending programs, technical assistance, and multilateral surveillance. While health policy is not part of the IMF’s direct mandate, the institution influences it indirectly through its work on the tax mix and domestic resource mobilization. Based on over 5, 400 IMF documents, the analysis finds that health taxes have not been a central focus of IMF engagement—and are typically framed in fiscal, rather than health, terms. References to health taxes peaked between 2017 and 2019, particularly in program-linked conditionality, whereas technical assistance remained episodic, reflecting its demand-driven nature. IMF advice did not vary across income groups or regions, despite wide disparities in fiscal capacity and health burdens, nor was it aligned with countries’ untapped revenue potential or actual excise performance. This suggests an opportunity for the IMF to place greater emphasis on health taxes in countries with low revenue-to-GDP ratios, where they could advance domestic resource mobilization while delivering a “double dividend” of better health outcomes and higher revenues. |
| Date: | 2025–10–27 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:733 |
| By: | Sebastián Pantoja-Barrios |
| Abstract: | Citizens in Colombia's conflict-affected regions protest to demand public goods provision while simultaneously producing public goods independently. This is surprising, as both actions are carried out by poor populations and are frequently repressed by violence. What explains when citizens make demands on the state and contribute to local public goods? Drawing on fiscal social contract theory, I argue that these actions are more likely among taxpayers, who perceive greater economic losses than non-taxpayers from the state's underprovision of public goods. |
| Keywords: | Public goods, Taxation, Politics, Colombia |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-90 |
| By: | Francesco Zezza; Gennaro Zezza |
| Abstract: | This paper investigates the implications of the European Union's revised fiscal governance framework for Italy, a country facing the dual challenge of high public debt and persistent economic stagnation. Using a Stock-Flow Consistent (SFC) macroeconometric model of the Italian economy (MITA), we assess the medium-term macroeconomic implications of the government Medium-term Fiscal-Structural Plan, and whether it aligns with debt stabilization and economic recovery goals. We show how the government expenditure path, consistent with the new Debt Sustainability Analysis, leads instead to an increase in debt/GDP. We perform alternative fiscal policy scenarios (higher/lower spending; higher/lower direct tax rate; and a policy mix of higher spending and higher tax rate) and look at the effects on growth and debt sustainability. Results highlight the trade-offs inherent in adhering to the revised fiscal rules, particularly the tension between achieving long-term debt reduction and supporting growth. |
| Keywords: | European Fiscal Rules; Debt Sustainability; Empirical Stock-Flow Consistent Models; Italy; Fiscal Policy |
| JEL: | C54 E12 E17 E44 E62 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1082 |
| By: | Koning, Pierre (Vrije Universiteit Amsterdam); Prudon, Roger (Lancaster University) |
| Abstract: | Spikes in exits at unemployment insurance (UI) benefit exhaustion into other benefit schemes such as sickness insurance (SI) are well-documented. These spikes could be driven by relatively healthy workers maximizing their total duration of benefit receipt, or workers in ill health who remain on UI while incapable of working. While the first explanation calls for a stricter SI and UI system, the second highlights the need for increased information provision. We study the importance of these explanations by first documenting a spike in exits into SI at UI benefit exhaustion in the Netherlands. Comparing detailed health and labor market characteristics of exit cohorts, we show that the spike is unlikely to be driven by maximizing behavior of relatively healthy workers. Instead, our results point to catch-up of initial non-take-up of SI by workers with substantial mental and physical health conditions. This opposes earlier work on substitution between UI and SI/DI. |
| Keywords: | spikes, unemployment insurance, sickness benefits, non-take-up |
| JEL: | H53 H75 J65 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18264 |