New Economics Papers
on Public Finance
Issue of 2005‒06‒05
seven papers chosen by

  1. Capital Income Taxation and the Dual Income Tax By Shigeki Morinobu
  2. On Taxation Pass-Through for a Monopoly Firm. By Rabah Amir; Isabelle Maret; Michael Troge
  3. Social Security in Developing Countries: Myth or Necessity? Evidence from India By Patricia Justino
  4. Tax Morale in Asian Countries By Benno Torgler
  5. Tax Morale in Australia: What Shapes it and Has it Changed over Time? By Benno Torgler; Kristina Murphy
  6. Tax Morale, Trust and Corruption: Empirical Evidence from Transition Countries By Benno Torgler
  7. Does Culture Influence Tax Morale? Evidence from Different European Countries By Benno Torgler; Friedrich Schneider

  1. By: Shigeki Morinobu (Ministry of Finance Japan)
    Abstract: In June 2004, the Government Tax Commission presented its report on the unified taxation system for financial income (hereinafter referred to as “integration of taxes on financial income”). Theoretically, the dual income tax (DIT) discussion introduced mainly in Nordic countries is at the core of the discussion about integration of taxes on financial income. The Tax Commission’s mid-term policy report (hereinafter referred to as “the mid-term policy report”), submitted in June 2002, lists DIT as a key issue for future consideration. Then, in the revised report submitted in November of the same year, the commission argues: “Establishing a tax system that is fair, simple, and easy to understand should be the basis of all taxes on financial assets. From this perspective, which meets the policy demand for a shift ‘from savings to investment,” with regard to the tax structure for financial transactions, the tax authorities should not only strive to ensure neutrality between financial instruments regarding taxes on interest, dividends, and capital gains but also aspire to integrate the various categories of financial income. In this case, the integration of taxes on financial income and the DIT should be considered as a future direction.” Specifically, in the FY 2003 tax reform, dividend income (large accounts excluded), which until then was taxed as part of aggregate income, is taxed as separate income and at the same rate as are capital gains and interest. In this paper, we will first give an overview of the discussions thus far on dual income tax, after which we will take up various issues surrounding the integration of taxes on financial income.
    Keywords: tax commision, financial income, dual income tax (DIT),
    JEL: H24 D14 H71
    Date: 2004–01
  2. By: Rabah Amir; Isabelle Maret; Michael Troge
    Abstract: This paper investigates the pass-through of an excise tax imposed on a monopoly firm with constant marginal cost. The optimal price increases as tax increases for any demand function. Tax pass-through is globally under or in excess of 100% according as the direct demand function is log-concave or log-convex. The analysis relies on supermodular optimization and delivers conclusions based on minimal su¢cient assumptions in a simple, broadly accessible and self-contained framework. Further results allow for mixed conditions that provide precise and local determination of pass-through. Several illustrative examples are given. Policy conclusions relating to the relative wisdom of taxing high versus low cost monopoly firms are drawn from the results.
    Date: 2004
  3. By: Patricia Justino (Poverty Research Unit at Sussex, Department of Economics, University of Sussex)
    Abstract: This paper discusses the importance of social security policies in developing economies, using empirical evidence from India. The paper discusses the viability of implementing systems of social protection in developing countries and provides an empirical analysis of the effects of socio-economic security policies on Indian’s economic performance between 1973 and 1999, using a two-stage least square model adapted to data from a panel of 14 Indian states. The results show that policies that strengthen the social and economic security of the Indian population have been an important endogenous variable to both the reduction of poverty and the economic growth in India.
    Keywords: Social security, social protection, economic growth, India, simultaneous equation models, panel data
    JEL: C33 H50 I38 O10 O40 O53
    Date: 2003–09
  4. By: Benno Torgler
    Abstract: This paper analyses tax morale in several Asian countries. The descriptive analysis indicates that tax morale is very low in the Philippines and relatively high in Japan, China, and Bangladesh. In general Asia has a higher tax morale than OECD countries, which might indicate cultural differences. The paper also analyses tax morale as a dependent variable and thus gives answers to what shapes tax morale. Pooling the Asian countries we find, e.g., that trust in the government and the legal system have a positive effect on tax morale. These results remain robust for India and Japan in a time series analysis.
    Keywords: tax morale; tax evasion; shadow economy
    JEL: H26 K42
    Date: 2004–01
  5. By: Benno Torgler; Kristina Murphy
    Abstract: Why citizens pay their taxes voluntarily is an important question for tax administrations worldwide. Some believe it is because taxpayers are deterred from tax evasion out of a fear of being caught or penalised. Others, in contrast, suggest that factors such as the level of tax morale one has (i.e., the intrinsic motivation one has to pay their tax) affects compliance behaviour. While there have been numerous empirical studies published that have explored the role of deterrence on tax compliance behaviour, very few studies have explored the concept of tax morale in any detail. This study therefore attempts to rectify this gap in the literature. If tax morale is important in determining compliance behaviour, as several researchers have suggested, then it is also important to understand what might affect one’s level of tax morale. The specific aim of this paper will be to identify factors that shape or have an impact on tax morale. Using data collected from the Australian wave of the 1981 and 1995 World Values Survey, this study will demonstrate that factors such as trust and moral beliefs play an important role in shaping tax morale in Australia. Further, it will be shown that tax morale has increased significantly in Australia since the early 1980s, and that it has done so at a faster rate than many other OECD countries. Possible explanations for this increase will be discussed.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Australia
    JEL: H26 H73
    Date: 2004–01
  6. By: Benno Torgler
    Abstract: This paper analyses tax morale in transition countries. Tax morale has been used as dependent variable working with World Values Survey and European Values data for different years (1990-2000). The results suggest that trust, measured as trust in the legal system, the government, the parliament and the national officers has a strong impact on tax morale. Furthermore, a higher degree of satisfaction with the political system leads to a higher tax morale. Furthermore, the paper investigates the correlation between corruption and tax morale. The bivariate as well as the multivariate analysis show that in transition countries a higher corruption leads to a lower tax morale.
    Date: 2004–02
  7. By: Benno Torgler; Friedrich Schneider
    Abstract: There is considerable evidence that enforcement efforts cannot fully explain the high degree of tax compliance. Previous studies have found differences in compliance behaviour across cultures. Novel in this paper is to investigate the impact of culture differences within a country rather than between countries. Thus, the main purpose of the paper is to see how culture affects tax morale, using World Values Survey (WVS) and European Values Survey (EVS) data. The empirical findings focus individually on Switzerland, Belgium and Spain, countries with a certain cultural variety. In general, the results indicate that the cultural background seems not to have a strong effect on tax morale within a country. However, there is evidence that there is a strong interaction between culture and institutions, which has a strong impact on tax morale.
    Keywords: Tax Morale; Tax Compliance; Tax Evasion; Culture
    JEL: H26 H73
    Date: 2004–07

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