nep-pub New Economics Papers
on Public Finance
Issue of 2006‒08‒19
thirteen papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Is VAT the Best Way to Impose a General Consumption Tax in Developing Countries By Richard Bird; Pierre-Pascal Gendron
  2. Optimal income taxation with single and couple households By GALLEGO A., Juan Miguel
  3. The Effect of Personal Income Tax Rates on Individual and Business Decisions - A Review of the Evidence By Mark Rider
  4. The Incidence of an Earned Income Tax Credit: Evaluating the Impact on Wages in the UK By Ghazala Yasmeen Azmat
  5. The transition from payg to funding: Application to the Luxembourg privat sector pension system By Muriel Bouchet
  6. Introducing Family Tax Splitting in Germany : How Would It Affect the Income Distribution and Work Incentives By Viktor Steiner; Katharina Wrohlich
  7. The Diverse Structures of Passenger Car Taxation in Europe and the EU Commissions Proposal for Reform By Uwe Kunert; Hartmut Kuhfeld
  8. Personal Income Taxation: The Cornerstone of the Tax System in Democratic Spain By Desiderio Romero Jordán; José Félix Sanz
  9. The Evolving Role of the Corporate Income Tax in Spain By Raquel Paredes Gómez
  10. The Personal Wealth Taxes: The Inheretance and Gift Taxes and the Net Wealth Tax in Spain By Laura de Pablos Escobar
  11. The Reform of Indirect Taxation in Spain: VAT and Excise By José Sánchez Maldonado; Salvador Gómez Sala
  12. Social Protection and Social Security Contributions in Spain By Ignacio Zubriri
  13. Environmental Taxes in Spain: A Missed Opportunity By Alberto Gago; Xavier Labandeira; Fidel Picos; Miguel Rodríguez

  1. By: Richard Bird (Andrew Young School of Policy Studies); Pierre-Pascal Gendron (Humber Institute of Technology and Advanced Learning)
    Abstract: In this paper we discuss some recent critical literature on VAT in developing countries relating to its revenue productivity, its equity, and its impact on the development of the formal economy. Illustrating our argument with reference to two recent country studies (of Ukraine and Jamaica) we conclude that while there is merit in many of the criticisms that have been made, on the whole if a country needs a general consumption tax, as most developing countries do, then VAT is the one to have in almost all cases – although this conclusion certainly does not imply that the VAT already in force in most such countries is necessarily the ‘best’ VAT for their circumstances.
    Keywords: value-added tax, progressivity, informal economy, Ukraine, Jamaica
    Date: 2006–05–01
  2. By: GALLEGO A., Juan Miguel
    Abstract: This paper reviews the literature on optimal income taxation with single and couple households. In the seminal works of Mirrlees and Atkinson and Stiglitz the household is composed by one member. However, I described a model where households can have more than one member. There is an economy which is composed by both one-memberand two member families. This structure introduces vertical and horizontal equity considerations. For linear taxation the results of Sheshinski hold, however in optimal income taxation additional results to those of Mirrlees should be considered.
    Date: 2004–10–01
  3. By: Mark Rider (Andrew Young School of Policy Studies)
    Abstract: An important goal of a state's economic policy is to create an attractive place to do business and well paying jobs for the future so that Rhode Island 's talented and well educated youth choose to pursue careers at home rather than in neighboring states. As discussed in greater detail, high state PIT rates make it more difficult for a state to achieve this objective. Federal and state governments frequently use progressive personal income tax (PIT) rate structures to address concerns about income inequality. However, the ability of state governments to do so may be limited because high PIT rates may adversely affect business location decisions, work effort, the form of compensation (e.g., fringe benefits, stock options, etc.), capital investment, and economic growth. The purpose of this study is to review the evidence regarding the effect of high state PIT rates on business and individual decisions.
    Keywords: Personal Income Tax Rates, PIT rate and Business Decisions,state's economic policy
    Date: 2006–04–01
  4. By: Ghazala Yasmeen Azmat
    Abstract: Tax credits have been a popular way to alleviate in-work poverty. The assumption is typicallythat the incidence is on the claimant workers. However, economic theory suggests noparticular reason to believe that this should be the case. This paper investigates the incidenceof the Working Families Tax Credit in the UK introduced in 1999, which unlike similar taxcredit policies was paid through the wage packet, increasing the connection between theemployer and worker with regard to the tax credit. Using two stage parametric and nonparametriccensored regression methods we find compelling evidence to suggest that (1) thefirm discriminates by cutting the wage of claimant workers relative to similarly skilled nonclaimantworkers when looking at men and (2) there is a spill-over effect onto the wage ofboth groups for both men and women.
    Keywords: Wages, Incidence, Tax Credits
    JEL: J30 H22 I38 D58
    Date: 2006–05
  5. By: Muriel Bouchet
    Abstract: Les perspectives budgétaires du régime général sur un horizon de long terme Un récent rapport préparé par le Comité de Politique Economique et par la Commission européenne met en exergue la forte augmentation attendue des dépenses de pension au Luxembourg, qui s?accroîtraient de plus de 7% du PIB de 004 à 050, soit la plus forte progression de l?Union européenne après le Portugal et Chypre. Comme l?indiquent de récentes projections de l?IGSS, le régime général de pension du Luxembourg est d?ailleurs susceptible d?enregistrer d?importants déficits dès 0 0, alors qu?il dégage pour l?instant de substantiels excédents. Sous l?hypothèse d?une croissance du PIB réel égale à 3% par an à partir de 030, les réserves du régime général laisseraient la place à une dette substantielle, qui atteindrait quelque 49% du PIB en 050. Un scénario alternatif, où la croissance serait limitée à , % par an, donnerait lieu à une évolution encore plus préoccupante. Dans ce dernier cas, l?endettement du régime général de pension se monterait en effet à 151% du PIB en 050 selon l?IGSS. Comme l?indique le graphique ci-dessous, les projections actualisées de la BCL, qui reposent sur les hypothèses synthétisées au tableau suivant, livrent des résultats similaires vers 050. De surcroît, la prise en compte par la BCL d?un horizon de projection plus long, qui permet d?incorporer l?ensemble du cycle de vie des nombreux frontaliers qui ont rejoint la population active du Luxembourg depuis le début des années quatre-vingt-dix, met en relief une accélération de la détérioration budgétaire au cours des années ultérieures à 050. La détérioration budgétaire serait imputable dans une large mesure à l?arrivée à l?âge de la pension d?importants contingents de frontaliers et de résidents étrangers. Selon le rapport annuel 004 de l?IGSS, les frontaliers ne représentaient que 17,6% des prestations en 004, ce qui est nettement inférieur à leur part dans les cotisations ? soit plus de 30%. Ce décalage donne lieu à un excédent certes substantiel, mais qui est nécessairement appelé à s?étioler. Même une croissance du PIB de 4% par an ne permettrait pas d?assurer la soutenabilité à terme du régime général de pension. En outre un tel scénario présuppose un accroissement peu réaliste du nombre de frontaliers, qui dépasserait le million à la fin de l?horizon de projection.
    Date: 2006–07
  6. By: Viktor Steiner; Katharina Wrohlich
    Abstract: We analyze the effects of three alternative proposals to reform the taxation of families relative to the current German system of joint taxation of couples and child allowances: a French-type family splitting and two full family splitting proposals. The empirical analysis of the effects of these proposals on the income distribution and on work incentives is based on a behavioral micro-simulation model which integrates an empirical household labor supply model into a detailed tax-benefit model based on the German Socio Economic Panel. Our simulation results show that under each reform the lion's share of the reduction in taxes would accrue to families with children in the upper part of the income distribution, and that expected labor supply effects are small for all analyzed family tax splitting reforms, both in absolute terms and relative to the implied fiscal costs.
    Keywords: Household Taxation, Income Distribution, Work Incentive, Microsimulation
    JEL: H24 H31 J22
    Date: 2006
  7. By: Uwe Kunert; Hartmut Kuhfeld
    Abstract: In this study we first analyze duties on passenger cars in 27 European countries. Taxes and fees related to the registration, ownership and use of cars are assessed differently across Europe, and their rates vary significantly. We find that the annual taxes levied on specific types of cars differ across countries by a factor of up to four, while the various kinds of duties levied account for extremely diverse shares of the entire car-related tax burden and give rise to very different ratios of fixed and variable components in the taxes levied. Given the importance of taxation systems for market and competitive conditions, the Euro-pean Commission is seeking to achieve reciprocal alignment of the various systems. The Commission has also proposed that greater importance be given to environmental criteria in the assessment of vehicle related taxes. Effectively in some countries, the registration taxes represent a significant burden on the acquisition of new vehicles; this factor reduces market transparency and may mean that taxes are levied twice. Only in a few countries' tax schemes is fuel consumption taken into account, and then only to a marginal degree. It is thus neces-sary to modify and simplify the tax systems in Europe, because it is crucial that the traffic sector contribute more to climate protection, and because motor vehicles impair local air quality. In this context, the overall structure of the various charges to passenger cars should be rebalanced, with CO2 emissions not being the sole focus.
    Date: 2006
  8. By: Desiderio Romero Jordán (Universidad Rey Juan Carlos); José Félix Sanz (Universidad Complutense de Madrid)
    Abstract: The aim of this chapter is to explain the most significant events during the lifetime of the personal income tax (PIT) which, since its introduction, has become the form of taxation most widely known by Spanish taxpayers. We will therefore describe its historical origins, analyze its significance within the Spanish tax framework and offer a statistical evaluation of the tax since it came into force. We will also review the three most significant processes of reform since 1978. The first was in 1991 under the Socialist government of Felipe González; the other two were carried out in 1998 and 2002 by José María Aznar's Partido Popular government.
    Keywords: Personal Income Taxation,Tax System, Spain, Tax Reform
    Date: 2006–06–01
  9. By: Raquel Paredes Gómez (Universidad Complutense de Madrid)
    Abstract: The aim of this chapter is to analyze the structure and performance of the Corporate Income Tax in Spain over the last 25 years. We will study the reasons, principles and objectives of the reforms undertaken and will examine the context of these amendments through the evolution of the basic components of the tax. . Besides, we will study the performance of the CIT from a revenue viewpoint and we will describe the principal results of the empirical studies that analyze the neutrality and competitiveness of the Spanish CIT. Finally, we will discuss some aspects of the reform which are still pending.
    Keywords: Corporate Income Tax, Spain, tax reform. Spnish CIT
    Date: 2006–01–01
  10. By: Laura de Pablos Escobar (Universidad Complutense de Madrid)
    Abstract: The aim of this chapter is to analyze the role played by the Personal Wealth Tax in the process of Spanish tax reform started in 1977. Besides the Personal Net Wealth Tax we also study the reform process of the Inheritance and Gift Taxes. These taxes have generally been justified on equity grounds, more specifically, their role of improving income distribution and the overall progressively of the fiscal systems. This chapter studies whether, in practice, these taxes have achieved their objectives starting with the 1977 Fiscal Reform until now, and what role they can play in the immediate future.
    Keywords: Inheritance and Gift Taxes, Net Wealth Tax, equity, progressivity,redistribution.
    Date: 2006–01–01
  11. By: José Sánchez Maldonado; Salvador Gómez Sala (Universidad de Málaga)
    Abstract: In this chapter we analyze the reform and evolution of consumption taxes in Spain over recent decades, paying particular attention to the new developments stemming from the introduction of the VAT in 1986 and the modifications carried out to excise taxes in order to bring the Spanish tax system into line with European Community legislation. In the second section we proceed to review the situation of consumption taxation in Spain in the years previous to the democracy’s fiscal reform. The third section deals with a basic description of the before-mentioned reform and includes an analysis of its main economic. It ends with the consideration of the role of indirect taxation in the financing of the territorial governments. The fourth section describes the evoluation of the consumption taxation pattern in Spain in relation to other OECD countries, beginning in the year 1965. The fifth section analyzes the process of fiscal harmonization of the VAT and of excise taxes in the European Union. The incidence of indirect taxation in Spain is studied in the sixth section from a personal and territorial perspective, given the implications of this last one in the finance of regional and local governments (Comunidades Autónomas y Corporaciones Locales). In seventh section, we consider the main pending issues as well as a variety of future reform options. The last section of the paper offers some concluding thoughts.
    Keywords: Indirect Taxation, Spain, VAT, Excise Tax, Tax reform
    Date: 2006–01–01
  12. By: Ignacio Zubriri (University of the Basque Country)
    Abstract: The purpose of this paper is to analyze social protection in Spain and its financing, paying special attention to the possible relationship between social protection and unemployment. I will first describe the evolution of the social insurance system in Spain and compare it with that of other countries (section 2). Section 3 describes the evolution of unemployment in Spain and explores its causes. In section 4, I analyze Social Security contributions and their possible impact on unemployment. Finally section 5 contains the conclusions.
    Keywords: Social Protection,Social Security, Social security Contributions, Spain, social insurance
    Date: 2006–01–01
  13. By: Alberto Gago; Xavier Labandeira; Fidel Picos; Miguel Rodríguez (Universidade de Vigo)
    Abstract: In this chapter we describe and assess the Spanish experience with environmental taxes in the last several decades, and formulate several suggestions for future developments in this area of tax reform. We first deal with the theoretical and policy contexts for environmental taxes and the so-called green tax reforms, to proceed with an enumeration of actions by the different levels of government in Spain . We show how the central and local governments' stand has not been favorable to the use of these tax instruments due to political beliefs and legal constraints, which have led to a poor energy and environmental performance in comparative European terms. At the same time, the lack of interest of central and local governments in such taxes has fostered an intense regional design and implementation in this field, mainly on emissions to air and waters. These applications share positive and negative aspects, as they contribute to internalize negative environmental effects, but often do so in an inefficient way with a clear revenue-raising component. We conclude that a serious and comprehensive use of environmental taxes in Spain should take into account optimal jurisdictional allocation and the presence of new regulatory approaches in environmental policies, with a focus on some specific fields such as waste, transport and tourism.
    Keywords: Environmental Taxes,Spain,Tax reform. environmental policies
    Date: 2006–01–01

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