nep-pub New Economics Papers
on Public Finance
Issue of 2006‒02‒05
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax incentives and economic effects - a general equilibrium approach By Alexandre Porsse; Eduardo Haddad
  2. Commodity Tax Reforms In A Many Consumers Economy: A Viable Decision-Making Procedure By Fabrizio Bulckaen and Marco Stampini
  3. Adjustment costs and the neutrality of income taxes By Matt Benge; George Fane
  4. Tax Competition Reconsidered By Amrita Dhillon; Myrna H. Wooders; Ben Zissimos
  5. Trans-Tasman Tax Reform: The Real Story By David G. Dunbar

  1. By: Alexandre Porsse; Eduardo Haddad
    Abstract: Tax incentives are common instruments in regional policies used to attract new investments and promote increase in employment and income, but the impact on regional public finances is very controversial. This paper uses an interregional computable general equilibrium model for the Brazilian economy to evaluate the net effects of tax incentives on the regional government revenues. The model takes into account the structural relationships between two regions and the specific characteristics of the Brazilian federalism that affects regional public finances. The theoretical specification allows capturing indirect and induced effects of the new investments and the net output of such incentive policies for the regional government revenues.
    Date: 2005–08
  2. By: Fabrizio Bulckaen and Marco Stampini
    Abstract: This paper deals with efficiency and distributional effects of marginal commodity tax reforms in economies with heterogeneous individuals. It contributes to the literature in three ways. First, a decision rule based on revenue potentialities – the ratio between marginal revenue and the tax base - is originally developed with reference to a many consumers economy. The relevance lies in the fact that these indicators do not depend on measures of utility. Second, the connection with former literature is analyzed. Third, a comprehensive and progressive decision-making procedure relying on revenue potentialities is defined. Overall, all that policy makers need to know – in order to look for improvements in efficiency and/or distribution through revenue-neutral marginal commodity tax reforms – is the revenue potentiality of each tax and the share of expenditure by poor families. An example with reference to Italian data is provided.
    Keywords: tax efficiency, commodity tax reform, public economics, revenue neutral, tax reform, commodity tax
    Date: 2006–01–10
  3. By: Matt Benge; George Fane
    Abstract: A true income tax would not affect asset values or investment decisions for given values of cash flows and pre-tax interest rates (Samuelson, 1964). However, most so-called income taxes do not fully tax capital gains on accrual. This note shows that in the absence of adjustment costs, investment decisions are not distorted by the lack of a comprehensive tax on the capital gains on unimproved land, provided that the depreciation of improvements is allowed as a tax deduction. It also provides the intuition underlying the closely related results of Hartman (1978) and Abel (1983).
    Keywords: Capital gains tax, depreciation, income tax, investment neutrality.
    JEL: H25
    Date: 2006
  4. By: Amrita Dhillon (Department of Economics, University of Warwick); Myrna H. Wooders (Department of Economics, Vanderbilt University); Ben Zissimos (Department of Economics, Vanderbilt University)
    Abstract: In a classic model of tax competition, we show that the level of public good provision and taxation in a decentralized equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other.
    Keywords: Efficiency, Nash equilibrium, over-provision, tax competition, under-provision
    JEL: C72 H73 H21 H42 R50
    Date: 2006–01
  5. By: David G. Dunbar
    Abstract: In 2003 the Australian and NZ governments enacted legislation to permit trans-Tasman companies to allocate to their shareholders franking credits and imputation credits. This legislation is known as the pro rata allocation method, and was heralded as a major improvement in trans-Tasman taxation. This paper critically evaluates the claims which have been made by the Australian and NZ governments about the reduction in personal income tax which the pro rata allocation solution will deliver to individual share holders in a typical trans-Tasman company. The paper concludes that the benefits have been significantly over stated and that a more effective legislative solution would have been the streaming model. Accordingly the pro rata allocation solution is unlikely to discourage trans-Tasman companies from engaging in profit repatriation strategies to overcome the inherent tax inefficiency associated with the pro rata allocation solution.
    Keywords: Australia, New Zealand, tax, pro rata allocation, streaming model, tax reform
    Date: 2006–01–10

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