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on Public Economics |
| By: | David Henning; Christos Kotsogiannis; Jukka Pirttilä; Luca Salvadori |
| Abstract: | Making use of a rich administrative dataset on Ugandan firms' tax filings covering the period 2013-21, this paper investigates the impact of tax audits on voluntary compliance, contrasting the effect of one vs multiple audits. Using a matched difference-in-differences approach with similar unaudited firms as controls, and a stacked design to address staggered treatment timing, the analysis shows that among firms that consistently file taxes over the study period, audits induce higher value added tax (VAT) liabilities. |
| Keywords: | Taxation, Audits, Tax evasion, Tax administration, Tax compliance |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-110 |
| By: | James Alm (Tulane University) |
| Abstract: | Tax reform and tax administration are closely linked. However, these links are not always fully discussed, fully analyzed, or even fully appreciated. In this paper, I discuss the links between tax administration reform and tax reform. I begin by discussing some basic aspects of tax administration, which suggest three "paradigms" for tax administration that emerge from the theoretical and empirical literature on what motivates individuals to pay -- or not to pay -- their taxes. I then summarize the main reasons why countries reform their tax systems and when these reforms are most likely to be successful and even to occur. This then leads to a detailed discussion of the central role of tax administration reform in tax reform, including an examination of the role of new technologies in tax administration. My main conclusions are twofold. First, a successful reform of a country's tax system requires also a concomitant and concurrent successful reform of a country's tax administration. Second, successful tax administration reform needs to go well beyond changes in enforcement policies alone. |
| Keywords: | Tax reform; tax administration; tax compliance; services; trust |
| JEL: | H20 H26 H60 H83 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2602 |
| By: | Sarah Clifford (University of Oxford); Jakob Miethe (University of Munich (LMU)); Camille Semelet (University of Munich (LMU), ifo institute, and World Bank) |
| Abstract: | This paper characterizes profit shifting behavior across the size distribution of multinational enterprises (MNEs) to evaluate the targeting of the recently introduced Global Minimum Tax (GMT). Using German microeconomic administrative data with no reporting gaps for tax havens, we first document reductions in tax payments after tax haven subsidiaries are added to a group and confirm their outsized productivity. As group size increases, so does the likelihood of including tax haven subsidiaries. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. A total of EUR 19 billion was shifted to tax havens by German MNEs in 2022. Large groups targeted by the GMT account for 95% of this amount. While this is mainly a function of their size, we also document a positive gradient in profit shifting aggressiveness relative to employment. Third, we relate revenue potential from taxing excess profits in low-tax jurisdictions to compliance costs of the GMT, using a 15% benchmark rate. For groups currently covered by the GMT, revenue gains significantly dominate costs, while extending coverage to additional groups yields only modest net gains. Our results support policy consistency of the GMT in the face of recent unilateral challenges. |
| Keywords: | Global Minimum Tax, Multinational Enterprises, Profit Shifting |
| JEL: | H26 G38 F34 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:035 |
| By: | James Alm (Tulane University) |
| Abstract: | Economists have put forth many specific tax design recommendations over the years, both for piecemeal changes to the tax system and for more fundamental reforms. These recommendations have typically been timely, plausible, and even elegant, and they often have had widespread agreement among economists, even those of greatly differing political sentiments. However, many -- indeed perhaps most -- of these proposals have gone nowhere in the actual policy implementation stage. Why is this? I argue here that the main reason for this lack of impact is politics -- and a failure by economists to consider fully the central role of politics in policy making. Of course, all policy changes in democracies, including those that involve taxes, necessarily revolve around political considerations by elected politicians as policy makers. However, my argument goes beyond this obvious truism. Instead, I emphasize one specific aspect of politics: Who gains and who loses from a tax policy change? I argue that these are the types of political considerations that are decisive because it is the distributional effects of policies that determine how people vote and so that also determine how their elected representatives vote. I illustrate these points with a brief -- and a deliberately selective -- history of what I term 'clever' policy recommendations made over the years by major figures in the broad field of public economics and the narrower field of taxation, I then discuss the many possible reasons for this lack of policy impact, and I identify the factor that seems most likely to drive actual tax policy choices -- the effects of tax policies on the winners and losers of the policies, as determined by broadly defined 'distributional effects'. I finish with a discussion of the ways in which economics -- and other disciplines -- might more productively contribute to the policy discussion. Along the way, I indicate the ways in which the chapters in this volume contribute to the ongoing policy discussion. |
| Keywords: | Taxation; tax policy; tax incidence; distributional effects; voting; political economy |
| JEL: | H20 H22 H50 D30 D72 D78 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2601 |
| By: | Cronin, David (Central Bank of Ireland) |
| Abstract: | Income tax’s share of total tax revenue (excluding excess corporation tax) has remained broadly stable since 2011 and above its values between 1996 and 2008, indicating that budgetary policy since the financial crisis of the late 2000s has not undermined this important source of Exchequer revenue. Compared to what occurred between 1996 and 2008, the net costs of income tax packages, as a percentage of the previous year’s income tax revenue, in Budgets since 2015 have been modest in terms of their estimated impact on the income tax take. For single taxpayers, the changes in average income tax rates between the 2013 and 2025 tax codes are small, with some shifting of income tax paid between its USC and non-USC components occurring. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:11/si/25 |
| By: | Matěj Bajgar (Charles University, CERGE-EI); Petr Janský (Charles University, CERGE-EI); Tijmen Tuinsma (Tax Justice Network, Charles University) |
| Abstract: | We study whether stronger tax compliance among multinationals can reduce industry concentration. Exploiting the 2016 introduction of country-by-country reporting in the European Union as a natural experiment, we implement a difference-in-differences design comparing large multinational groups subject to the reform with unaffected firms. We find that increased tax compliance led to a significant decline in multinationals’ consolidated global sales, with a one-percentage-point rise in effective tax rates associated with a 1.8% reduction in sales. Sales of the affected multinationals’ subsidiaries also declined, and industry concentration fell in sectors where top firms were subject to the reform. The results suggest that curbing profit-shifting can reduce the competitive advantage of large multinationals and, consequently, industry concentration. |
| Keywords: | tax compliance; tax avoidance; multinational; corporate tax; effective tax rate; industry concentration; European Union |
| JEL: | F23 H26 L11 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:038 |
| By: | Mohammad H. Sepahvand; Sankar Placide Some; Annika Lindskog; Ann-Sofie Isaksson; Heather Congdon Fors |
| Abstract: | This study analyzes how violent conflict influences taxation in a poor, conflict-affected country, Burkina Faso. We use a unique, large, and representative panel dataset on tax collection of firms between 2015 and 2022 and geographically match these data with indicators of violent conflict at the municipal level. We find that firms pay a lower amount of tax in areas affected by violence. We also find that both turnover and firm survival decrease in areas as they become more insecure. |
| Keywords: | Violent conflict, Business tax, Firms, Burkina Faso |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-115 |
| By: | Lorenzo Garlanda-Longueville (Université Paris Nanterre - EconomiX, Banque de France); Mathias Lé (Banque de France); Kevin Parra Ramirez (Banque de France, Sciences Po) |
| Abstract: | Tax havens represent the largest financing hub for financial institutions. For banks, they account for more than 20% of all cross-borders banking debt worldwide. Yet, our understanding of the underlying drivers remains limited. Drawing on a unique global dataset covering major international banks and tax havens – and employing a novel approach to isolate regulatory arbitrage – this paper finds that the location of cross-border intra-group debt held by multinational banks is shaped by tax considerations, even when regulatory differences are taken into account. For the first time, we provide direct evidence of profit shifting via debt shifting on a global scale, overcoming a key limitation of existing studies which typically rely on single-country data. Based on our sample data, we show that the magnitude of “excess” offshore banking debt globally recorded in tax havens is significant. |
| Keywords: | Profit shifting, Debt shifting, Multinational banks, Taxation, Intragroup transactions |
| JEL: | H26 G21 F23 F34 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:036 |
| By: | Kim, Beomyun |
| Abstract: | This study examines how changes in state sales tax rates affect retail prices and consumer purchases of soda and candy. Between 2009 and 2018, five U.S. jurisdictions (Arkansas, Colorado, Illinois, Vermont, and Washington, D.C.) eliminated reduced sales tax rates on these products, providing natural experiments for analysis. Using retail scanner data from 2008 to 2019, the study applies Synthetic Difference-in-Differences and related methods to estimate causal effects of these policy changes. The results yield three main findings. First, statistically significant reductions in sales volumes are observed only in states where tax increases exceeded five percentage points. Second, stronger consumer responses are observed for soda than for candy. Third, consumer responses strengthen gradually over time rather than materializing immediately. This is the first study to comprehensively analyze the effects of sales tax exemption terminations on beverage and snack markets across multiple states with staggered adoption, demonstrating that the magnitude of tax effects may be associated with product characteristics and tax rate changes, with important implications for the design of health-related tax policies. |
| Keywords: | Food Security and Poverty |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360882 |
| By: | Alice Chiocchetti (Paris School of Economics); Manon François (Stanford University); Laure Heidmann (CREST and INSEE); Giulia Aliprandi (Paris School of Economics and EU Tax Observatory) |
| Abstract: | This paper quantifies how profit shifting erodes workers’ earnings by reducing profit-sharing payouts in French multinational firms. We leverage newly available administrative microdata on the global activity of multinational firms linked to employer-employee data to build a credible counterfactual of profits and profit-sharing absent profit shifting. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. We show that profit shifting reduces annual employees’ earnings by 2.6%. Low-income workers are disproportionately affected. The bottom 10% of workers lose 3.2% of wages, compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global profitability, rather than subsidiary-level profitability, would increase wages by 4.1% for workers in profit-shifting subsidiaries. |
| Keywords: | Multinational Firms, Profit shifting, Tax revenue, Incidence |
| JEL: | F23 H25 H26 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:039 |
| By: | Sebastian Dyrda; Guangbin Hong; Muhammad Ali Sajid; Joseph B. Steinberg |
| Abstract: | We study international spillovers of corporate tax reforms in a fragmented global tax regime. Using firm-level evidence on the 2017 U.S. Tax Cuts and Jobs Act (TCJA) and a quantitative general-equilibrium model, we illustrate how multinational enterprises (MNEs) propagate local policy shocks throughout the global economy. Our framework emphasizes two key intrinsic properties of intangible capital: non-rivalry and mobile ownership. We find the TCJA generated positive outward spillovers: First, it boosted U.S. MNEs’ intangible investment, raising their foreign subsidiaries’ output. Second, it increased tangible investment of foreign MNEs’ U.S. subsidiaries, incentivizing them to expand intangible investment at home. Conversely, a Global Minimum Tax (GMT) implemented by the rest of the world generates negative inward spillovers for the United States, even if U.S.-parented MNEs are exempt. These findings illustrate that there is no such thing as a purely domestic corporate tax policy. |
| JEL: | F23 H25 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34627 |
| By: | Abhinav Khemka; Claudia Serra-Sala |
| Abstract: | We investigate how political corruption affects citizens' willingness to disclose tax evasion. We conducted a survey experiment with 1, 200 respondents in Bangalore, India, combining corruption vignettes and list experiments. Respondents were randomly presented with hypothetical candidates whose attributes varied along three dimensions: (a) alleged honesty versus corruption; (b) prioritization of infrastructure versus other public spending; and (c) political party affiliation. |
| Keywords: | Corruption, Tax evasion, List experiment, India, Voting behaviour |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-114 |
| By: | Brun Lidia (European Commission - JRC); Speitmann Raffael (European Commission - JRC); Stasio Andrzej Leszek (European Commission - JRC); Stoehlker Daniel (European Commission - JRC) |
| Abstract: | This paper examines the Corporate Income Tax (CIT) compliance gap, the difference between revenue due under full compliance and actual collections, across 23 EU Member States, Norway, and Iceland. Existing bottom-up and top-down estimation methods each face notable limitations: Bottom-up approaches are data-intensive and hard to harmonise, while top-down methods depend on uncertain adjustments for undeclared activity and cannot adequately capture multinational profit shifting. An implementation of the IMF RA-GAP top-down method in Spain illustrates these challenges, revealing substantial data needs, conceptual mismatches between national accounts and tax data, and reliance on unverifiable assumptions. To address these issues, the Joint Research Centre proposes a simplified top-down methodology based on Eurostat s exhaustiveness adjustments. This approach is transparent, reproducible, and feasible with data already reported by Member States. Applying it across countries reveals large variation in CIT gaps ranging from below 3% in high-compliance jurisdictions to above 20 35% in others with an unweighted average gap of 10.9% (around EUR 38 billion in 2017). Sectoral patterns consistently show higher gaps in informal, cash-intensive industries and lower gaps in regulated sectors. The paper concludes that while no single method captures all dimensions of non-compliance, the proposed approach offers a practical tool for regular EU-wide monitoring. Its effectiveness depends on the timely and harmonised publication of exhaustiveness adjustment data to support consistent CIT gap estimation and policy analysis. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202507 |
| By: | Chu, Angus C.; Wang, Xilin |
| Abstract: | This study develops a Malthusian growth model with early state formation and interstate competition. It explores how states' tax capacity and provision of productive public goods shape population dynamics and interstate competition. Each state has an optimal tax rate, increasing in the elasticity of agricultural output with respect to public goods. Without interstate competition, population either converges to a Malthusian trap or grows steadily depending on this elasticity. With interstate competition, states either coexist or only one survives. Population of any surviving state first rises and then falls with its tax rate, capturing the rise and fall of the state. |
| Keywords: | Public goods; interstate competition; Malthusian growth theory |
| JEL: | E60 H20 H56 O43 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126926 |
| By: | Pintu Parui (Indian Institute of Technology Bombay); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | What policies can foster sustained long-run economic growth? To answer this question, we develop a tractable and unified framework that integrates five strands of research on: (i) the effects of public basic research and private profit-driven applied research on economic growth, (ii) the relationship between health and economic growth, (iii) the education-fertility trade-off and its effect on human capital accumulation, (iv) longevity-induced innovation, and (v) the optimal design of tax and subsidy policies to maximize welfare. We analytically characterize the long-run balanced growth path and employ numerical methods to analyze the transitional dynamics and to compute optimal tax and subsidy schemes. Our findings show that (i) government subsidies for education and health are particularly effective in promoting economic growth and welfare; (ii) current public spending on education, health, basic research, and applied research is typically suboptimal as it falls short of the welfare-maximizing levels; and (iii) endogenizing longevity dampens the growth effects of government subsidies. |
| Keywords: | Endogenous Growth, Innovation-Driven Growth, Public Investment, Fiscal Policy, Education Policy, Health Policy, Research and Development (R&D), Welfare Analysis |
| JEL: | O41 I28 H51 H52 J13 E62 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp396 |
| By: | Milda Valentinaite; Egle Ceponyte; Ingars Zustrups |
| Abstract: | The shift in monetary policy has different repercussions on bank profits depending on the prevalence of fixed or floating interest rates charged on loans. The Baltic states provide a case study of the impact of monetary tightening on profits in predominantly floating interest rates setup amid high liquidity. This paper examines the drivers of the profit surge following 2022-2023 tightening cycle, reviews the fiscal policy responses chosen by Lithuania, Latvia and Estonia, and draws tentative lessons on the design and effectiveness of sector-specific windfall taxation. |
| Keywords: | Monetary policy, Interest rates, Fiscal policy, fiscal rules, inflation, Baltic countries. |
| JEL: | H25 E43 G21 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:086 |
| By: | Parui, Pintu; Prettner, Klaus |
| Abstract: | What policies can foster sustained long-run economic growth? To answer this question, we develop a tractable and unified framework that integrates five strands of research on: (i) the effects of public basic research and private profit-driven applied research on economic growth, (ii) the relationship between health and economic growth, (iii) the education-fertility trade-off and its effect on human capital accumulation, (iv) longevity-induced innovation, and (v) the optimal design of tax and subsidy policies to maximize welfare. We analytically characterize the long-run balanced growth path and employ numerical methods to analyze the transitional dynamics and to compute optimal tax and subsidy schemes. Our findings show that (i) government subsidies for education and health are particularly effective in promoting economic growth and welfare; (ii) current public spending on education, health, basic research, and applied research is typically suboptimal as it falls short of the welfare-maximizing levels; and (iii) endogenizing longevity dampens the growth effects of government subsidies. |
| Keywords: | Endogenous Growth; Innovation-Driven Growth; Public Investment; Fiscal Policy; Education Policy; Health Policy; Research and Development (R&D); Welfare Analysis |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wus005:80526475 |
| By: | Oskar Grevesmühl; Martin Åström |
| Abstract: | This Economic Brief explains how the Swedish national fiscal framework, since its gradual introduction starting in the mid-1990s, has contributed to restoring fiscal discipline and decreasing the government -debt-to-GDP ratio. The main components of that framework (including the so called surplus target, expenditure ceilings and a debt anchor) are presented and compared with that of its EU peers. This is followed by a closer look at the distribution of the achieved consolidation across revenues and expenditures, respectively, and across the various levels of government. Thereafter, the paper discusses the particular role of defining a so-called “reform space” in steering the budgetary process. Following the established practice of reviewing the level of the surplus target every eight years and as a result of the emergence of new spending needs, for example on defence, and the need to transpose new legislation at EU level into national legislation, there is a discussion on how to adapt the framework. The paper describes the main proposals in this discussion, including the lowering of the target for government net lending to 0% of GDP and the new approach to increasing defence spending without breaching the fiscal rules. The final section concludes by distilling a few tentative lessons from the Swedish experience. |
| Keywords: | Fiscal policy coordination, fiscal rules, fiscal sustainability, indexation of public expenditure and revenues. |
| JEL: | H2 H3 H6 H7 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:087 |