nep-pub New Economics Papers
on Public Finance
Issue of 2006‒09‒03
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Measuring Tax Efficiency By Raimondos-Møller, Pascalis; Woodland, Alan D.
  2. Can Capital Income Taxes Survive? And Should They? By Peter Birch Sørensen
  3. Social security, income taxation and poverty distribution By MALDONADO, Darío
  4. Value Added Tax Treatment of Financial Services: A Developing Country Perspective By Pierre-Pascal Gendron
  5. The Incentive to Declare Taxes and Tax Revenue: The Lottery Receipt Experiment in China By Junmin Wan
  6. Social Security and Intergenerational Redistribution By Bhattacharya, Joydeep; Reed, Robert

  1. By: Raimondos-Møller, Pascalis (Department of Economics, Copenhagen Business School); Woodland, Alan D. (Department of Economics, Copenhagen Business School)
    Abstract: This paper introduces an index of tax optimality that measures the distance of some current tax structure from the optimal tax structure in the presence of public goods. In doing so, we derive a [0, 1] number that reveals immediately how far the current tax configuration is from the optimal one and, thereby, the degree of efficiency of a tax system. We call this number the Tax Optimality Index. We show how the basic method can be altered in order to derive a revenue equivalent uniform tax, which measures the size of the public sector. A numerical example is used to illustrate the method developed.
    Keywords: Tax optimality index; excess burden; distance function
    JEL: H21 H41
    Date: 2006–08–30
  2. By: Peter Birch Sørensen (Department of Economics, University of Copenhagen)
    Abstract: The paper surveys some main results in the theory of capital income taxation in the open economy; reviews recent trends in international taxation, and discusses alternative blueprints for fundamental capital income tax reform from the perspective of an open economy faced with growing mobility of capital income tax bases.
    Date: 2006–08
  3. By: MALDONADO, Darío
    Abstract: In this paper I consider the normative arguments that justify a public social security system as a redistributive device when goverment is concerned with individual utility and poverty. Redistribution can be done using social security, income taxation or both. The main objective of this paper is to show how the consideration of a planner that cares about poverty and utility increases the desirability of social with respect to the case when the planner only cares about utility.
    Date: 2006–01–01
  4. By: Pierre-Pascal Gendron (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: How to tax financial services is in many ways the key ‘frontier’ issue for VAT in developed countries. No convincing conceptually correct and practical solution for capturing the bulk of financial services under the VAT has yet been developed anywhere. Developing and transitional countries face constraints that make the taxation of financial services an even more formidable challenge. Since even developed economies with sophisticated financial institutions and markets and capable tax administrations have opted with few exceptions to exempt such activities, it is not surprising that exemption also rules in almost all developing and transitional countries. Surprisingly, however, it may not be that difficult to collect at least some VAT on financial services even in such countries. This paper examines the current VAT treatment of financial services, as well as its rationales and economic effects. It then outlines alternatives to that treatment, focusing on developing and transitional economies and their tax policy constraints. Finally, the paper outlines best practices for tax reform and then proposes an alternative to the exemption system in the form of a hybrid system to capture VAT revenues in developing and transitional economies.
    Keywords: value added tax, financial services, developing and transitional countries
    JEL: H24 O23
    Date: 2006–08
  5. By: Junmin Wan (Osaka University)
    Abstract: We examine the validity of a new system of taxation called lottery receipts in China theoretically and empirically. Tax collection is difficult as the government difficultly monitors the actual economic dealings. To bring out the private information on transaction known only to a seller and a buyer, the government has set up a lottery receipt system which has been tried out in many areas. If the net revenue from a lottery receipt is invested in pure public goods, the lottery receipt will been purchased even if the consumer has expected quasi-linear utility. By issuing a lottery receipt, the government may prevent tax evasion caused by conspiracies between consumers and firms and collect tax effectively. Estimation is performed based on panel data for different periods from a total of 37 districts in Beijing and Tianjin during 1998-2003. The lottery receipt experiment has significantly raised the business tax, the growths of business tax and total tax revenues.
    Keywords: tax evasion, business tax, lottery receipt experiment, random trend (growth) model
    JEL: H26 D81 D82
    Date: 2006–09
  6. By: Bhattacharya, Joydeep; Reed, Robert
    Abstract: Many countries around the world have large public pension programs with significant cross-cohort redistribution. This paper provides a rationale for such programs in a lifecycle framework with search and matching frictions in the labor market. In the model, public pension programs alter the age composition of the labor force by inducing the jobless elderly to retire. This improves the allocation of workers to jobs, raises firm entry and may also improve welfare. By requiring a long history of labor market attachment as a precondition to receiving benefits, these programs raise the future value of current employment for the young. This redistributes bargaining strength and income from the young to the old.
    Keywords: Search, labor market efficiency, unemployment, lifecycle, pensions
    JEL: E0
    Date: 2006–08–23

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