nep-pub New Economics Papers
on Public Finance
Issue of 2008‒06‒27
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pigouvian Taxation in a Ramsey World By Robin Boadway; Jean-Francois Trembley
  2. Optimal Tax Design and Enforcement with an Informal Sector By Robin Boadway; Motohiro Sato
  3. Mixed Taxation, Public Goods and Transboundary Externalities: A Model with Large Jurisdictions By Aronsson, Thomas; Persson, Lars; Sjögren, Tomas
  4. Energy Tax Incentives and the Alternative Minimum Tax By Curtis Carlson; Gilbert E. Metcalf
  5. Corporate Taxes, Profit Shifting and the Location of Intangibles within Multinational Firms By Dischinger, Matthias; Riedel, Nadine

  1. By: Robin Boadway (Queen's University); Jean-Francois Trembley (University of Ottawa)
    Abstract: This paper studies the optimal Pigouvian tax for correcting pollution when the government also uses distortionary taxes to raise revenues. When preferences are quasilinear in leisure and additive, the Pigovian tax can be separated from the Ramsey revenue-raising tax. We characterize the relationship between the Pigouvian tax and marginal social damages in a variety of circumstances. In a setting with homogeneous households, the Pigouvian tax exceeds marginal damages if goods have inelastic demands, and vice versa. When households are heterogeneous so taxes can be redistributive, the Pigouvian tax gives more weight to damages suffered by low-income persons. The analysis is extended to allow for costly abatement. In general corrective taxes have to be applied to both emissions and output of the polluting good.
    Keywords: Pigouvian tax, optimal taxes, pollution tax
    JEL: H21 H23
    Date: 2008–06
  2. By: Robin Boadway (Queen's University); Motohiro Sato (Hitotsubashi University)
    Abstract: An optimal commodity tax approach is taken to compare trade taxes and VATs when some commodities are produced informally. Trade taxes apply to all imports and exports, including intermediate goods while the VAT applies only to sales by the formal sector and imports. The VAT can achieve production efficiency within the formal sector, but unlike the trade tax regime, it cannot indirectly tax pure profits. Making the size of the informal sector endogenous in each regime is potentially decisive. The ability of the government to change the size of the informal sector through costly enforcement may also tip the balance in favor of the VAT.
    Keywords: informal sector, optimal taxation, value-added tax, trade taxes
    JEL: H21 H26 O17
    Date: 2008–06
  3. By: Aronsson, Thomas (Department of Economics, Umeå University); Persson, Lars (Department of Economics, Umeå University); Sjögren, Tomas (Department of Economics, Umeå University)
    Abstract: This paper concerns income taxation, commodity taxation, production taxation and public good provision in a multi-jurisdiction framework with transboundary environmental damage. We assume that each jurisdiction is large in the sense that its government is able to influence the world-market producer price of the externality-generating commodity. The decision-problem facing the government in each such jurisdiction is represented by a two-type model (with asymmetric information between the government and the private sector). We show how the possibility to influence the world-market producer price adds mechanisms of relevance for redistribution and externality-correction which, in turn, affect the domestic use of taxation and public goods. Finally, with the noncooperative Nash equilibrium as a reference case, we consider the welfare effects of policy coordination.
    Keywords: Trade and Environment; Optimal Taxation; Externalities
    JEL: F18 H21 H23
    Date: 2008–06–17
  4. By: Curtis Carlson; Gilbert E. Metcalf
    Abstract: We take a first look at limitations on the use of energy-related tax credits contained in the General Business Credit (GBC) due to limitations within the regular corporate income tax as well as the AMT. Between 2000 and 2005, firms were unable to use all energy-related tax credits due to GBC limitations in the regular tax. The AMT has a smaller but still pronounced impact on the ability of firms to use these credits. Finally, we provide some illustrative calculations to demonstrate how the AMT can lead to very different levelized costs of producing electricity from a wind power project.
    JEL: H20 H23 Q48
    Date: 2008–06
  5. By: Dischinger, Matthias; Riedel, Nadine
    Abstract: Intangible assets are one major source of profit shifting opportunities due to a highly intransparent transfer pricing process. Our paper argues that multinational enterprises (MNEs) optimize their profit shifting strategy by locating shifting–relevant intangible property at affiliates with a low statutory corporate tax rate. Using panel data for European MNEs and controlling for unobserved time–constant heterogeneity between affiliates, we find that the lower a subsidiary’s tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.
    Keywords: corporate taxation; multinational enterprise; profit shifting; intangible assets; micro level data
    JEL: H25 F23 H26 C33
    Date: 2008–06

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