nep-pub New Economics Papers
on Public Finance
Issue of 2010‒08‒06
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Outsourcing Cost and Tax Progression under Nash Wage Bargaining with Flexible Outsourcing By Koskela, Erkki
  2. Impact of VAT Exemptions in the Postal Sector on Competition and Welfare By Helmut Dietl; Christian Jaag; Markus Lang; Martin Lutzenberger; Urs Trinkner
  3. Taxing Sweets: Sweetener Input Tax or Final Consumption Tax? By Zhen Miao; John C. Beghin; Helen H. Jensen
  4. The Impact of Tax Reform on New Car Purchases in Ireland By Hennessy, Hugh; Tol, Richard S. J.

  1. By: Koskela, Erkki (University of Helsinki)
    Abstract: It is analyzed the impacts of outsourcing cost and wage tax progression under labor market imperfections with Nash wage bargaining and flexible outsourcing. With sufficiently strong (weak) labor market imperfection, lower outsourcing cost has a wage-moderating (wage-increasing) effect so that there is a negative (positive) effect on equilibrium unemployment. Higher tax progression, to keep the relative tax burden per worker constant, has a wage moderating and a positive effect on employment and negative effect on outsourcing.
    Keywords: Nash wage bargaining, outsourcing, labor tax reform
    JEL: H22 J41 J51
    Date: 2010–07
  2. By: Helmut Dietl; Christian Jaag; Markus Lang; Martin Lutzenberger; Urs Trinkner
    Abstract: The focus of our paper is on the competitive effects of the proposed VAT regime relative to selected alternatives. We also highlight the welfare effects of various VAT scenarios. While an exempt operator cannot reclaim VAT paid on inputs (relevant for non-labor inputs only) and therefore faces higher costs ceteris paribus, an important fraction of customers of non-exempt operators will not be able to deduct VAT themselves. Hence, the exempt incumbent operator has on the one hand a cost disadvantage, and on the other, a price advantage. The net effect will depend on the fraction of non-labor inputs relative to the fraction of non-rated customers. We report market shares, optimum prices, tax revenue and welfare in a liberalized postal market. The various scenarios differ by the operators’ VAT status. We also take into account the fraction of non-rated customers that cannot deduct VAT themselves. The paper sheds light on the main competitive impact of VAT policies while showing the consequences on overall welfare. We show that the results are very sensitive to the operators’ labor policies. Consequently, VAT exemptions have a different impact in countries with different labor regulations. The comprehensive treatment of competition and welfare enables us to provide guidance on how to resolve the policy trade-off between consumer surplus, government tax revenue, and a level playing field in liberalized postal markets.
    Keywords: Value Added Taxation, Regulation, Post, Competition, Welfare
    JEL: H25 L52
    Date: 2010–07
  3. By: Zhen Miao; John C. Beghin; Helen H. Jensen (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: In order to reduce obesity and associated costs, policymakers are considering various policies, including taxes, to change consumers' high-calorie consumption habits. We investigate two tax policies aimed at reducing added sweetener consumption. Both a consumption tax on sweet goods and a sweetener input tax can reach the same policy target of reducing added sweetener consumption. Both tax instruments are regressive, but the associated surplus losses are limited. The tax on sweetener inputs targets sweeteners directly and causes about five times less surplus loss than the final consumption tax. Previous analyses have overlooked this important point.
    Keywords: added sweeteners, consumption tax, demand, health policy, soda tax, sugar.
    Date: 2010–07
  4. By: Hennessy, Hugh; Tol, Richard S. J.
    Abstract: We examine the impact of recent tax reforms in Ireland on private car transport and its greenhouse gas emissions. A carbon tax was introduced on fuels, and purchase (vehicle registration) and ownership (motor) taxes were switched from engine size to potential emissions. We use a demographic model of the car stock (by age, size, and fuel) and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes. The model shows a dramatic shift from petrol to diesel cars, particularly for large engines. The same pattern is observed in the latest data on car sales. This has a substantial impact on tax revenue as car owners shift to the lower tax rates. The tax burden has shifted from car ownership to car use, and that the overall tax burden on private car transport falls. As diesel engines are more fuel efficient than petrol engines, carbon dioxide emissions fall modestly or, if we consider the rebound effect of travel costs on mileage, minimally. From the perspective of the revenue, the costs per tonne of carbon dioxide avoided are (very) high.
    Keywords: Private car transport/Republic of Ireland/carbon dioxide emissions/fiscal policy/taxes/ireland/taxes/Ireland/Private car transport/transport/Car ownership/Carbon dioxide emissions
    Date: 2010–07

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