nep-pub New Economics Papers
on Public Finance
Issue of 2006‒02‒26
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Value of Broadband and the Deadweight Loss of Taxing New Technology By Austan Goolsbee
  2. Optimal Corporation Tax: An I.O. Approach By Luca Colombo; Paola Labrecciosa; Patrick Paul Walsh
  3. Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits By Immervoll, Herwig; Levy, Horacio; Lietz, Christine; Mantovani, Daniela; O'Donoghue, Cathal; Sutherland, Holly; Verbist, Gerlinde
  4. Russian Attitudes Toward Paying Taxes – Before, During, and After the Transition By Benno Torgler; James Alm; Jorge Martinez-Vazquez
  5. The Evolution of Tax Morale in Modern Spain By Benno Torgler; Jorge Martinez-Vazquez

  1. By: Austan Goolsbee
    Abstract: With fixed costs of developing technology, taxes can generate large efficiency costs by slowing the rate of diffusion and these costs are not accounted for in conventional analyses. This paper illustrates this by analyzing the impact that taxes would have had on broadband Internet access at an early stage of its diffusion around the country, combining data on individual demand by area with data on supplier entry in those markets. Applying a tax to broadband in 1998 would have reduced the quantity and generate a large deadweight loss in the conventional model but when the analysis accounts for the fixed costs of entering new markets, taxes would have also delayed entry in several markets. In these places, the lost consumer surplus from delay is an additional deadweight loss and it more than doubles the estimated efficiency costs of taxation. The conventional model also dramatically understates the share of tax burden that would have been borne by customers.
    JEL: H2 D6
    Date: 2006–02
  2. By: Luca Colombo; Paola Labrecciosa; Patrick Paul Walsh
    Abstract: Theory predicts that optimal effective corporation tax rates will benegatively related to industry specific sunk costs, and hence industryconcentration. Governments should tax industries with monopolistic powersoftly. Evidence suggests that this Schumpeterian (1942) principle ofcorporate taxation was used widely across industries in France, Italy and theUK in the 1990s.
    Keywords: Effective Corporation Tax Rate, Industry Sunk Costs,Industry Concentration.
    JEL: H25 L52
    Date: 2006–02
  3. By: Immervoll, Herwig (University of Cambridge, OECD, European Centre for Social Welfare Policy and Research, Vienna and IZA, Bonn); Levy, Horacio (University of Essex); Lietz, Christine (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Mantovani, Daniela (University of Cambridge and Prometeia, Bologna); O'Donoghue, Cathal (National University of Ireland, Galway, IZA, Bonn and CHILD); Sutherland, Holly (University of Essex and DIW Berlin); Verbist, Gerlinde (University of Antwerp)
    Abstract: The systems of direct taxes and cash benefits in the Member States of the European Union vary considerably in size and structure. We explore their direct impacts on cross-sectional income inequality (termed "redistributive effect" for the purpose of this paper) using EUROMOD, a tax-benefit microsimulation model for the European Union. This relies on harmonised household micro-data representative of each national population together with simulations of entitlements to cash benefits and liabilities for taxes and social contributions. It allows us to draw a more comprehensive – and comparable – picture of the combined effects of transfers and taxes than is usually possible. We decompose the redistributive effect of taxbenefit systems to assess and compare the effectiveness of individual policies at reducing income disparities. We derive results for the 15 "old" members of the European Union and present them for each country separately as well as for the EU-15 as a whole.
    Keywords: Income inequality, Redistribution, Microsimulation, European Union
    JEL: C81 D31 H22 H55
    Date: 2006–02
  4. By: Benno Torgler (World Bank); James Alm (Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies)
    Abstract: This paper examines citizens’ attitudes toward paying taxes – what is sometimes termed their “tax morale”, or the intrinsic motivation to pay taxes – focusing on the experience of individuals in the Russian Federation. A unique aspect of our analysis is our ability to study tax morale before (1991), during (1995), and shortly after (1999) the transition of the Russian economy from a centrally planned economy to one based on market reliance. Our empirical analysis uses data from the World Values Survey and the European Values Survey. The results show decay in tax morale in the first four years of the transition from 1991 to 1995, and a small recovery in 1999. These results are consistent with the relevance of social norms in tax compliance, where the widespread perception of tax evasion and of a corrupt and inefficient state led initially to a decline of tax morale. However, the results also suggest that the restoration of a higher level of trust in the state, after some progress in the transition to a market economy, positively influenced tax morale. Using disaggregated data for Russian regions, we also find significant regional differences in tax morale, reflecting the degree of trust different regions have toward Moscow’s institutions and policies.
    Keywords: Russia, Taxes, Transition, Tax Morale
    Date: 2005–09–05
  5. By: Benno Torgler (World Bank); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies)
    Abstract: This paper studies the evolutions of tax morale in Spain in the post-Franco era. Tax morale, defined as the intrinsic motivation to pay taxes, might be a key determinant of the actual degree of tax compliance in a country. But despite its potential significance, most studies in the previous literature have treated tax morale as an exogenous residual. In contrast to the previous tax compliance literature, the current paper investigates tax morale as the dependent variable and attempts to answer what actually shapes tax morale. The empirical analysis uses survey data from two sources: the World Values Survey (WVS) and the European Values Survey (EVS). The data allow us to observe tax morale in Spain for the years 1981, 1990, 1995, and 1999/2000. The study of the evolution of tax morale in Spain over nearly a 20-year span is particularly interesting because it provides close to a natural experiment setting. Constitutional and political changes after Franco died in 1975 and the advent of a fully democratic state, deep tax reforms, a significant push for decentralization, joining the European Community, and so on, provide excellent benchmarks for institutional changes that are expected in the compliance literature to change tax morale.
    Keywords: Tax Morale, Spain, tax compliance, Spanish Tax Reform
    Date: 2005–12–01

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