New Economics Papers
on Public Finance
Issue of 2011‒05‒14
four papers chosen by

  1. Financial Transactions Taxes By Parthasarathi Shome
  2. Optimal Taxation with Rent-Seeking By Casey Rothschild; Florian Scheuer
  3. The optimal structure of commodity taxation in a monopoly with tax avoidance or evasion By Goerke, Laszlo
  4. Strategic Pricing and Health Price Policies By Bonnet, Céline; Réquillart, Vincent

  1. By: Parthasarathi Shome
    Abstract: This paper attempts to address both theoretical and practical considerations for a tax such as financial transactions taxes (FTT). It includes examples of FTT in the wider context, for example, on stocks and derivatives, currency transactions, and tangible property. Most of the discussion centres on financial market issues to reflect the thrust of current discussion and debate. [Working Paper 254]. URL:[ aper_254.pdf].
    Keywords: stocks, currency transactions, G20, Capital Inflows, Derivatives, Economic Efficiency, Financial Assets, Fiscal Stimulus, Stock Market Transactions Costs, Taxes, Volatility, FTT,
    Date: 2011
  2. By: Casey Rothschild; Florian Scheuer
    Abstract: Recent policy proposals have suggested taxing top incomes at very high rates on the grounds that some or all of the highest wage earners are engaged in socially unproductive or counterproductive activities, such as externality imposing speculation in the financial sector. To address this, we provide a model in which agents can choose between working in a traditional sector, where private and social products coincide, and a crowdable rent-seeking sector, where some or all of earned income reflects the capture of pre-existing output rather than increased production. We characterize Pareto optimal linear and non-linear income tax systems under the assumption that the social planner cannot or does not observe whether any given individual is a traditional worker or a rent-seeker. We find that optimal marginal taxes on the highest wage earners can remain remarkably modest even if all high earners are socially unproductive rent-seekers and the government has a strong intrinsic desire for progressive redistribution. Intuitively, taxing their effort at a lower rate stimulates their rent-seeking efforts, thereby keeping private returns for other potential rent-seekers low and discouraging further entry.
    JEL: D3 D5 D8 E2 E6 H2
    Date: 2011–05
  3. By: Goerke, Laszlo
    Abstract: If tax obligations are met, the balanced-budget substitution of an ad valorem tax on output for a specific tax not only raises a monopolist's production, but also represents a Pareto improvement. However, if tax avoidance or evasion is feasible and the marginal costs of such actions decline with the legal tax burden, a monopolist will respond to a balanced-budget substitution of an ad valorem tax for a specific tax by reducing output, while profits remain constant. Therefore, in the presence of tax avoidance or evasion activities a move towards specific taxation can represent a Pareto improvement. --
    Keywords: Ad valorem tax,Monopoly,Output,Tax avoidance,Tax evasion,Specific tax
    JEL: H21 H25 H26
    Date: 2011
  4. By: Bonnet, Céline; Réquillart, Vincent
    Abstract: Healthier food diet is likely to prevent numerous non communicable diseases. Then there is a growing interest in evaluating the impact of food price taxation on food consumption. However, strategic reactions of both manufacturers and retailers are missing in empirical analysis. Rather, passive pricing is assumed. We develop a structural econometric model, to analyze vertical relationships between the food industry and the retail industry. We apply this model to the beverage industry and consider taxation of sugar. After selecting the ’best’ model of vertical relationships, we simulate different taxation scenarios. We consider excise tax as well as ad valorem tax. We find that firms behave differently when facing an ad valorem tax or an excise tax. Excise tax is overshifted to consumer prices while ad valorem tax is undershifted to consumer prices. We find that an excise tax based on sugar content is the most efficient at reducing soft drink consumption. Our results also indicate that ignoring strategic pricing by firms leads to misestimate the impact of taxation by 15% to 40% depending on the products and the tax implemented.
    Keywords: excise tax, ad valorem tax, vertical contracts, strategic pricing, differentiated products, soft drinks
    JEL: H32 L13 Q18 I18
    Date: 2011–04

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