nep-pub New Economics Papers
on Public Finance
Issue of 2007‒05‒26
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Let's make the tax system more lovable By Paunić, Alida
  2. Analyzing a Flat Income Tax in the Netherlands By Bas Jacobs; Ruud A. de Mooij; Kees Folmer
  3. Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection By David A. Grigorian; Hamid Reza Davoodi

  1. By: Paunić, Alida
    Abstract: Making the taxes acceptable to large number of people by allocating their obligation to the chosen project is the main subject of this paper. In this way a greater objectivity, transparency and local goals are set in according to the preferences of the tax contributors. State Investment office prevents the rule of invisible hand of market by allocation part of tax money to the less developed regions reducing difference between them.
    Keywords: tax; principal agent problem; welfare
    JEL: D61 H00 D72
    Date: 2007–05
  2. By: Bas Jacobs (Universiteit van Amsterdam, Tilburg University, CentER, Netspar, and CESifo); Ruud A. de Mooij (CPB Netherlands Bureau for Economic Policy Analysis, Erasmus Universiteit Rotterdam, Netspar, and CESifo); Kees Folmer (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: A flat tax rate on income has gained popularity in European countries. This paper assesses the attractiveness of such a flat tax in achieving redistributive objectives with the least cost to labour market performance. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms, matching frictions, and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. This finding bolsters the notion that a linear tax is less efficient than a non-linear tax to obtain redistributive goals.
    Keywords: Flat tax; Labour market; General equilibrium; Equity; Optimal taxation
    JEL: D3 D5 H2
    Date: 2007–03–21
  3. By: David A. Grigorian; Hamid Reza Davoodi
    Abstract: Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy.
    Date: 2007–05–03

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