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on Public Finance |
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Issue of 2009‒06‒03
five papers chosen by |
| By: | Antonio Pedone |
| Abstract: | The wide gap between tax theory and tax practice may be traced back, among other things, to the focus in tax theory on the level and optimal structure of tax rates, assuming that tax bases are consistently defined, precisely measurable and readily and uniformly assessable. This approach overlooks the variances between tax design, tax law, tax impact, tax incidence and tax perception. The effects of taxes on efficiency and equity depend not just on the tax rate schedule adopted but also on differences in tax treatments resulting from the definition, measurement and assessment of tax bases. The Italian experience in the field of income taxation shows the extent to which the definition, measurement and assessment of tax bases matter. Many problems associated with defining, measuring and assessing tax bases, which the personal nature and high progressivity of income tax had contributed to highlighting and accentuating, remain still unresolved and require further research of a better understanding of the rationale, causes and effects of many differentiated tax treatments. |
| Keywords: | tax treatment, tax design, personal income tax, tax assessment |
| JEL: | H20 H24 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:119&r=pub |
| By: | Aronsson, Thomas (Umeå University); Koskela, Erkki (University of Helsinki) |
| Abstract: | This paper concerns optimal redistributive income taxation and provision of a public input good in a two-type model with a minimum wage policy implemented for the low-ability type, where firms may outsource part of the production process abroad, and where outsourcing is substitutable for domestic low-ability labor. Our results show that the incentives for the government to relax the self-selection constraint and to increase the employment among the low-skilled reinforce each other in terms of marginal income taxation; both of them contribute to increase the marginal income tax rate implemented for the low-ability type and decrease the marginal income tax rate implemented for the high-ability type. The appearance of equilibrium unemployment also constitutes an incentive to implement a tax on outsourcing. Without a direct instrument for taxing outsourcing, the government may reduce the amount of resources spent on outsourcing by increased provision of the public input good, which leads to less wage inequality and increased employment. |
| Keywords: | outsourcing, optimal nonlinear taxation, public goods, unemployment |
| JEL: | H21 H25 J31 J62 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4196&r=pub |
| By: | Richard E. Baldwin (Graduate Institute, Geneva); Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University) |
| Abstract: | This paper studies tax competition in a setting that allows for agglomeration economies and heterogeneous firms. We find that the Nash equilibrium involves the large country charging a higher tax than the small nation, with this rate being too low from a social point of view. Tighter integration of markets leads to an intensification of competition, a drop in Nash tax rates, and a narrowing of the gap. Since large, productive firms are naturally more sensitive to tax difference in our model, large firms are the crux of tax competition in our model. This also means that tax competition has consequences for the average productivity of the big and small nations' industry; by lowering tax rates, the small nation can attract high-productivity firms. |
| Keywords: | Firm heterogeneity, Nash equilibrium tax, Stackelberg equilibrium tax, collusion, average productivity |
| JEL: | H32 P16 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:237&r=pub |
| By: | Södersten, Jan (Department of Economics); Lindhe, Tobias (Uppsala Center for Fiscal Studies) |
| Abstract: | This paper reconsiders the effects of dividend taxation. Particular attention is paid to the form of the “equity trap”, that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn’s (1991) criticism of the well-known King and Fullerton (1984) methodology for underestimating the cost of new share issues amounts to a misleading comparison across two different regimes for the equity trap. Contrary to Sinn, we find that when dividends are paid following a new issue, as assumed by King-Fullerton, the cost of capital is higher than is the case when no dividends are paid. |
| Keywords: | dividend taxation; share repurchases; equity trap; cost of capital; nucleus theory; growth path |
| JEL: | H24 H25 H32 |
| Date: | 2009–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2009_007&r=pub |
| By: | Thomas Hemmelgarn (European Commission.); Gaëtan Nicodème (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, ECARES, Université Libre de Bruxelles, Brussels, European Commission and CESifo.) |
| Abstract: | This paper reviews the economic effects of the EU Savings Taxation Directive. The Directive aims at enabling taxation of foreign interest payments received by individuals in accordance with the rules of their State of residence. The data suggest that the Directive, which is based on automatic information exchange, has not led to major shifts in international savings. However, this result has to be interpreted with caution since the available data is scarce and not always conclusive. |
| Keywords: | Savings Taxation, Withholding Tax, Information Exchange, European Union |
| JEL: | F21 F33 G12 G28 H24 H26 H87 K34 O16 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-023&r=pub |