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on Public Economics |
| By: | Nadine Riedel; Franziska Sicking; Ida Zinke |
| Abstract: | We study the impact of tax preparers on corporate tax optimization in South Africa. The analysis draws on the population of corporate income tax returns linked to data on tax preparer use. Consistent with tax code complexity and frictions in the take-up of tax advantages, we document that firms' reported taxable income and tax payments decline significantly when they start utilizing tax preparer services. |
| Keywords: | Taxation, Business tax, Tax compliance, South Africa |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-64 |
| By: | Nicolas Djob (CY Cergy Paris Université, THEMA) |
| Abstract: | We study optimal commodity taxation in an open economy with monopolistic competition and asymmetric fiscal capacity. In a two-country model, a supranational authority uses destination-based consumption taxes to finance public spending, correct market distortions, and redistribute across countries. We show that in the first-best, domestically produced goods are always subsidized, while cross-border tax differentials emerge based on relative labor valuations. In the second-best, when lump-sum transfers are unavailable, the optimal tax system resembles a pattern of asymmetric tariffs: goods from countries with lower marginal costs of public funds are subsidized, while more competitive trade directions are taxed. These results challenge the conventional neutrality of VAT under trade liberalization and suggest that differentiated tax treatment by origin can improve welfare. Our findings call for a reassessment of uniform VAT regimes, especially in economically asymmetric unions. |
| Keywords: | optimal taxation, monopolistic competition, fiscal asymetry, tariff equivalence, tax coordination, VAT |
| JEL: | F10 F13 H21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2025-13 |
| By: | Rym Aloui (Université Lumière Lyon 2, CNRS, Université Jean Monnet Saint Etienne, EMLyon Business School, GATE, 69007, Lyon, France); Hafedh Bouakez (HEC Montréal, 3000 Côte-Sainte-Catherine, Montréal, Québec, Canada) |
| Abstract: | We derive the (second-best) optimal long-run carbon tax in a polluted economy with preexisting tax distortions, where labor and capital income taxes adjust endogenously to changes in the ratio of public debt to GDP via pre-established fiscal rules, and sovereign debt carries default risk. Relative to the no-climate-policy scenario, the welfare-maximizing carbon tax lowers the debt-to-GDP ratio as well as labor and capital income taxes, while raising consumption and GDP. The strength of these effects depends on the aggressiveness of the tax rules and on the initial level of public debt. When initial debt is low, the optimal carbon tax and the resulting increase in consumption, GDP, and welfare rise with the aggressiveness of the tax rules. When initial debt is high, however, this monotonic relationship breaks down, and the highest welfare gain from the optimal carbon levy is attained when the tax rules are moderately aggressive. This result hinges crucially on the convexity of the default probability with respect to the ratio of public debt to GDP. |
| Keywords: | Distortionary Taxes, Optimal Carbon Tax, Public Debt, Revenue Recycling, Second Best, Sovereign Default |
| JEL: | E62 H21 Q56 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2519 |
| By: | Mr. Alexander D Klemm |
| Abstract: | This note describes how most features of an income tax system (and to some extent social security and welfare) can be described as a combination of lumpsums and marginal tax rates and plotted in a summary chart. While this is by no means a new method, applying it consistently can help tremendously in understanding the impact of tax reforms on tax systems, including by identifying any unintentional humps or notches in tax schedules. This note uses this approach to discuss, for example, universal basic incomes, the issue of whether tax allowances should be phased out, and the difference between tax credits and allowances. It also points to the limitations of the approach, such as conditions that cannot be summarized in such tax schedules. |
| Keywords: | Income Tax; Marginal Tax Rate; Average Tax Rate |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfhtn:2025/007 |
| By: | Frederico Alencar (CAEN - Graduate Studies in Economics, Federal University of Ceara, Brazil); Marcus Araripe (CAEN - Graduate Studies in Economics, Federal University of Ceara, Brazil); Marcelo Arbex (Department of Economics, University of Windsor); Marcio V. Correa (CAEN - Graduate Studies in Economics, Federal University of Ceara, Brazil) |
| Abstract: | This paper quantifies the impact of tax evasion on the labor-income Laffer curve in Brazil. We develop a heterogeneous-agent model with incomplete markets, progressive taxation, and imperfect tax enforcement. Beyond the well-known arithmetic and economic effects, the model highlights a novel evasion effect – higher statutory rates induce greater concealment of income and reduce effective tax collections. Calibrated to Brazilian data, the model shows that the aggregate Laffer curve peaks at a marginal rate of 25.3%, below the current 27.5%. Tax evasion reduces potential revenue by up to 54% (3.1% of GDP), with losses concentrated among high-income households. A disaggregated analysis further reveals heterogeneous responses across income groups, underscoring distributional and policy implications. |
| Keywords: | Laffer Curve, Tax Evasion, Labor Income Taxation, General Equilibrium. |
| JEL: | E20 E60 D85 H26 I10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2505 |
| By: | Qi Shao (School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China; Economic Growth Centre, School of Social Sciences, Nanyang Technological University, Singapore); Danhua Deng (Fudan University); Zhuo Qiao (School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China); Xinyang Li (School of Economics and Management, Tsinghua University, Beijing, China); Tianyu Bai (School of Business, Sun Yat-sen University, Guangzhou, China) |
| Abstract: | This study uses the implementation of the Golden Tax Project Phase III (CTAIS-3) in China as a quasi-natural experiment to explore the impact of big data tax enforcement on the corporate tax digital transformation. By constructing the corporate tax digital transformation index, the findings reveal that CTAIS-3 significantly promotes corporate tax digital transformation through compliance and cost effects. |
| Keywords: | Big Data Tax Enforcement; Corporate Tax Digital Transformation; Compliance Effect; Cost Effect |
| JEL: | H25 M15 O33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nan:wpaper:2507 |
| By: | Kimberly A. Clausing; Maurice Obstfeld |
| Abstract: | The year 2025 brought a remarkable shift in the role of tariffs in the US economy, as the Trump administration simultaneously escalated the use of broad tariffs and ensured that Congress enacted large income tax cuts. This fiscal switch has important implications for the US tax system. While maintaining tariff rates at summer 2025 levels would generate large government revenues, such broad tariffs have significant downsides: Efficiency losses would approach one-third of revenues raised, the tax system would be less progressive, and there would be serious tax administration concerns. The fiscal shift also has significant macroeconomic implications, although probably not the intended ones. Broad tariffs generate a large negative supply shock, simultaneously raising prices and reducing macroeconomic activity. |
| JEL: | F13 F32 F38 F42 F52 H21 H23 H26 H68 L52 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34192 |
| By: | Yusuke Makino (Graduate School of Economics, The University of Tokyo); Hikaru Ogawa (Faculty of Economics, The University of Tokyo) |
| Abstract: | This paper studies the anticipated effects of a Global Minimum Tax (GMT). Although the GMT is widely expected to curb tax competition by raising effective tax rates in low-tax jurisdictions, we show that by weakening direct competition in the short-run, it can induce entry by countries that previously could not participate in the long-run. This entry expands the set of competing jurisdictions and, on this extensive margin of participation, can place additional downward pressure on tax rates. Consequently, the introduction of the GMT need not restrain excessive tax reductions. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2025cf1259 |
| By: | Alessandro Belmonte; Vincenzo Bove; Jessica Di Salvatore |
| Abstract: | Can the exposure to civil war make people more motivated to pay taxes and (re)build the state? Our project examines this question in the context of Africa, a region where civil wars have frequently undermined state capacity. We move from the popular Tillian view of war-making as state-making to study how civil wars shape states' capacity to collect and mobilize revenues (i.e. tax compliance and tax morale) in Sub-Saharan Africa. |
| Keywords: | Civil conflict, State capacity, Tax compliance, Tax morale, Discrimination, Ethnicity, Sub-Saharan Africa |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-65 |
| By: | König, Tobias; Schmacker, Renke |
| Abstract: | Using surveys and experiments, we provide evidence on how people think about and justify sugar-sweetened-beverage (SSB) taxes, a widely discussed behavioral policy intervention. We show that motives to correct internalities and behavioral biases impact policy preferences almost as much as standard externality reasoning. However, antipaternalistic attitudes explain why many people oppose SSB taxes although they acknowledge the relevance of behavioral biases. We demonstrate that instructional explanations about how behavioral SSB taxes work significantly increase support for such taxes. By contrast, simple information feedback regarding the statistical prevalence of internalities and externalities has no effect. Our findings suggest that the nature of information provision-particularly explaining a policy's goals and mechanisms-is crucial for enhancing its acceptability. |
| Keywords: | Paternalism, sin tax, internality, externality, soda tax, self-control |
| JEL: | H23 I18 D12 D78 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wzbmbh:328006 |
| By: | Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; Xu, Shu |
| Abstract: | This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets. JEL Codes: H32, H55, J30, J23, H25 |
| Keywords: | taxes; labour market; social security; remuneration; China; Asia; Eastern Asia |
| Date: | 2024–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:ifprid:140480 |
| By: | García-Miralles, Esteban; Freier, Maximilian; Riscado, Sara; Brusbārde, Baiba; Cochard, Marion; Cornille, David; Dicarlo, Emanuele; Delgado-Téllez, Mar; Fadejeva, Ludmila; Flevotomou, Maria; Henne, Florian; McIndoe-Calder, Tara; Pidkuyko, Myroslav; Roter, Mojca; Savignac, Frédérique; Kastelec, Andreja Strojan; Leventi, Chrysa; Mazzon, Alberto; Abela, Glenn; Boyd, Laura; Debattista, Ian; Dolls, Mathias; Harrer-Bachleitner, Alena; Jászberényi-Király, Viktor; Lay, Max; Lehtonen, Laura; Mastrogiacomo, Mauro; Moser, Mathias; Nevicky, Martin; Peichl, Andreas; Tuzikas, Vaidotas; Ventouris, Nikos; Wemans, Lara |
| 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 microsimulationapproach. 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, 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, either through 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. JEL Classification: D31, H24, E62 |
| Keywords: | bracket creep, indexation, inflation, personal income tax |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253136 |
| By: | Ziyan Zhao (Economic Growth Centre, School of Social Sciences, Nanyang Technological University); Pengyu Liu (School of Business and Management, Jilin University, 2699 Qianjin Avenue, Changchun city, Jilin province, China.); Guoxin Song (School of National Development and Security Studies, Jilin University, 2699 Qianjin Avenue, Changchun city, Jilin province, China.) |
| Abstract: | This study proposes a new latent threshold time-varying parameters factor-augmented vector autoregressive (LT-TVP-FAVAR) model and then explore the dynamic impact of Chinese tax policy on economic growth from the dual perspective of total tax revenue and tax structure. The proposed LT-TVP-FAVAR model can both model parameter changes and avoid overparameterization such that it can capture economic dynamics better. We propose a two-step estimation method (including a Markov chain Monte Carlo algorithm) to estimate the LT-TVP-FAVAR model. Extensive point forecasts present evidence for the LT-TVP-FAVAR model’s strength. The main empirical conclusions are: (1) increasing total tax revenue has a negative impact on economic growth, but this has weakened since China entered the economic new normal period; (2) From the perspective of tax structure, increases in both commodity tax and income tax primarily exert a positive effect on economic growth, while increases in the other tax have a negative effect on economic growth. Additionally, the positive effect of increasing commodity taxes on economic growth has obviously weakened since China entered the economic new normal period, whereas the positive effect of income tax on economic growth sharply increased after the outbreak of the COVID-19 pandemic. The inhibitory effect of increases in the other tax on economic growth during the economic new normal and COVID-19 pandemic periods is stronger than during the financial crisis and economic recovery periods. |
| Keywords: | Tax policy, Economic growth, Dynamic impact, LT-TVP-FAVAR |
| JEL: | C11 C32 C51 E60 O47 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:nan:wpaper:2402 |
| By: | Celine Bonnet; Fabrice Etile; Sebastien Lecocq |
| Abstract: | Reforming alcohol price regulations in wine-producing countries is challenging, as current price regulations reflect the alignment of cultural preferences with economic interests rather than public health concerns. We evaluate and compare the impact of counterfactual alcohol pricing policies on consumer behaviors, firms, and markets in France. We develop a micro-founded partial equilibrium model that accounts for consumer preferences over purchase volumes across alcohol categories and over product quality within categories, and for firms' strategic price-setting. After calibration on household scanner data, we compare the impacts of replacing current taxes by ethanol-based volumetric taxes with a minimum unit price (MUP) policy of 0.50 Euro per standard drink. The results show that the MUP in addition to the current tax outperforms a tax reform in reducing ethanol purchases (-15% vs. -10% for progressive taxation), especially among heavy drinking households (-17%). The MUP increases the profits of small and medium wine firms (+39%) while decreasing the profits of large manufacturers and retailers (-39%) and maintaining tax revenues stable. The results support the MUP as a targeted strategy to reduce harmful consumption while benefiting small and medium wine producers. This study provides ex-ante evidence that is crucial for alcohol pricing policies in wine-producing countries. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.14116 |
| By: | Jesse LaBelle; Fernando M. Martin; Ana Maria Santacreu |
| Abstract: | We study how international tax regimes and intellectual property (IP) rights shape the global allocation of intangible assets. Using a new dataset of cross-border patent transactions, we find that tax differentials are a key determinant of intra-firm transfers within multinational companies. Stronger IP rights play a bigger role in inter-firm transactions. To interpret these patterns, we develop a model in which firms choose to license, sell, or profit-shift patents depending on tax wedges and differences in IP protection. The theory rationalizes these findings and highlights how differences in global taxation and IP rights jointly determine the movement of intangible assets across borders. |
| Keywords: | intangibles; cross-border patent sales; licensing; profit shifting; taxation; intellectual property rights |
| JEL: | F12 O33 O41 O47 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:101822 |
| By: | Miftakul Khoiri (Faculty of Economics and Business, Universitas Trisakti, Kampus A, Jl. Kyai Tapa No.1 Grogol, 11440, Jakarta, Indonesia Author-2-Name: Nirdukita Ratnawati Author-2-Workplace-Name: Faculty of Economics and Business, Universitas Trisakti, Kampus A, Jl. Kyai Tapa No.1 Grogol, 11440, Jakarta, Indonesia Author-3-Name: Khomsiyah Author-3-Workplace-Name: Faculty of Economics and Business, Universitas Trisakti, Kampus A, Jl. Kyai Tapa No.1 Grogol, 11440, Jakarta, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - In Islamic economic theory, Zakat is pivotal as a religious duty and a tool for fostering wealth distribution and reducing poverty. Incorporating Zakat into tax frameworks may substantially impact either the zakat intention or taxpayer compliance. Methodology/Technique - This study examines the integration of Zakat within tax systems as a mechanism for poverty alleviation (SDG 1) and institutional strengthening (SDG 16) through a dual-method analysis combining a Systematic Literature Review (SLR) and Bibliometrics. Analyzing 150 Scopus-indexed articles (2015–2025) screened via PRISMA to 22 key studies, we employ Bibliometrix (biblioshiny) and VOSviewer to map: (1) co-authorship networks, (2) keyword co-occurrence trends, and (3) topics' impacts. Findings - Reveal three critical insights. First, professional Zakat-tax integration has significant potential for reducing the tax burden, especially in Muslim-majority countries, while enhancing compliance through religious-economic synergy, as well as for achieving SDGs 1 and 16. Second, research focus has shifted from conceptual debates to empirical evaluations of digital zakat systems. Third, policy fragmentation persists, with a few studied countries achieving complete zakat-tax harmonization. Novelty - The study contributes a novel compliance-efficiency framework for policymakers, demonstrating how zakat deductions can simultaneously advance SDGs targets when coupled with institutional reforms. This study pioneers the examination of how Zakat-tax integration dually influences Zakat intention and tax compliance. Type of Paper - Review" |
| Keywords: | Professional zakat; tax deduction; SDGs; modern tax system; SLR; PRISMA; bibliometric |
| JEL: | H20 M48 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:gtr:gatrjs:afr240 |
| By: | António Afonso; M. Carmen Blanco-Arana; Ana J. Cisneros-Ruiz |
| Abstract: | The main aim of this paper is to empirically assess the impact of education and tax revenue onfostering new business creation in the OECD countries. To this end, we employ fixed effects and random effects models using panel data from 2006 to 2022, incorporating alternative conditions. Results confirm that while education and the economic situation are key pillars in fostering new business creation, the role of tax revenue in supporting economic development – and, by extension, new business formation – is fundamental, even if non-linear, with a threshold of 30% of GDP. Tax revenue collected by governments provides essential funding for public goods and services such as infrastructure, education, and innovation support programs, all of which contribute to creating an environment where new businesses can emerge and thrive. Our findings remain robust under the GMM estimation. |
| Keywords: | new business, tax revenue, education, economic growth, panel data |
| JEL: | C23 H2 I2 M20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12180 |
| By: | Alessandra Cepparulo; Vito Ernesto Reitano |
| Abstract: | This Economic Brief analyses the euro area fiscal stance, i.e. the impulse that national and the EU budgets provide to the euro area economy, with a focus on the 2024-2026 period. Overall, after significant expansion in 2020-2023, the euro area fiscal stance turned contractionary in 2024, driven by lower capital transfers mainly due to the phase-out of large tax credits for housing renovations in Italy. Compliance with the recommended net expenditure paths would entail a slightly contractionary fiscal stance for the euro area in 2025 and 2026. However, the higher defence spending, including under the flexibility granted via the national escape clause, is expected to lead to a less restrictive fiscal stance |
| Keywords: | Fiscal policy coordination, fiscal rules, fiscal stance, inflation, business cycles, automatic stabilisers, fiscal forecast, sovereign debt sustainability, euro area. |
| JEL: | E61 E62 H50 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:085 |
| By: | Yang, Zixuan |
| Abstract: | Focusing on the Port of Piraeus as a case of institutional innovation, this study explores how digital taxation reforms can diminish 'distance friction in maritime trade. By integrating Greek myDATA e-invoicing system with the ICISnet Customs single-window, a pre-clearance process markedly accelerates procedural flows and augments institutional trust in Port of Piraeus. Analytically, the study situates these outcomes within a Technology Organization Environment framework and a theory of institution-to-process-to-efficiency. The findings demonstrate that although initial friction may arise, sustained system stabilization delivers amplified efficiency, especially in transshipment hub contexts like Piraeus. Building on these insights, the paper proposes a cohesive strategy combining system-level enhancements. The strategies include UID pre-clearance benchmarks, frequent performance metrics, and crisis playbooks. This integrated model significantly advances digital Customs integration and offers a scalable road map for countries aiming for resilient and efficient port systems, even if the countries are outside the EU. Finally, several limitations are put forward to be studied in the future. |
| Keywords: | digital taxation; e-invoicing; customs modernization; operational resilience; port efficiency |
| JEL: | H20 L92 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129776 |
| By: | Hung Q. Tran |
| Abstract: | When President Donald Trump gave his State of the Union address to a joint session of the United States Congress on March 4, 2025, many of his announced tariffs went into effect. These included a 25% levy on most goods imports from Canada (10% on oil and gas) and Mexico (though Trump subsequently exempted Canadian and Mexican imports that satisfy USMCA rules of origin requirements); and 20% (doubling the 10% implemented in February) on all imports from China. A 25% tariff has been imposed on all imported steel and aluminum; this could be raised to 50% on Canada’s metals as President Trump has threatened. He also planned a 200% tariff on champagne and European Union spirits in response to the EU reinstating an import tax on American whiskey. Another wave of tariffs is set to be applied in early April, including sector-specific tariffs (especially on automobiles) and reciprocal levies (on countries with national sales taxes or value added taxes—implemented in Europe and many other countries). Trump has repeatedly threatened to impose 100% tariffs on BRICS countries that seek to reduce the dollar’s dominant role in global finance. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbtrad:pb017_25 |