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on Public Finance |
| By: | Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Christian Jaag (Institute of Public Finance and Fiscal Law, University of St. Gallen); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Martin Lutzenberger (Lucerne University of Applied Sciences); Urs Trinkner (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | In most member states of the European Union (EU), universal postal services provided by the incumbent operator are exempt from value added taxes (VAT) on the grounds that they are the Òpublic postal service.Ó Other postal service providers have to charge VAT at the standard rate. 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 operatorsÕ 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 tax, indirect taxation, tax regulation, tax exemption, universal service obligation, postal sector |
| JEL: | H21 H25 L51 L87 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0145&r=pub |
| By: | Blomquist, Sören (Uppsala Center for Fiscal Studies); Christiansen, Vidar (Department of Economics, University of Oslo); Micheletto, Luca (Uppsala Center for Fiscal Studies) |
| Abstract: | Several contributions in the optimal taxation literature have emphasized that, when individuals’ preferences are not separable between leisure and other goods, it is desirable to supplement a nonlinear income tax with public provision of private goods. Moreover, it has also been shown that the choice between a topping-up and an opting-out scheme depends on whether the publicly provided good is a complement or substitute with leisure, with opting-out (topping-up) being the preferred scheme for goods which are substitutes (complements)for labor. In this paper, using the self-selection approach to tax analysis, we revisit these results in the presence of tax avoidance, and investigate how public provision interacts with the agents’incentives to engage in tax avoidance. Three results are obtained. First, we show that tax dodging opportunities imply that non-separability between labor and other goods is neither a necessary nor a sufficient condition to make public provision of private goods a welfare-enhancing policy instrument. Second, we show how tax dodging opportunities limit the scope for using topping-up provision schemes as a redistributive device. Finally, we show that, for most of the public provision schemes previously analyzed in the literature, being a welfare-enhancing policy instrument goes hand in hand with weakening the agents’incentives to shelter income from the tax authority. However, we also point out an important exception to this pattern. |
| Keywords: | optimal nonlinear income tax; public provision of private goods; tax avoidance |
| JEL: | H21 H26 H42 |
| Date: | 2011–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2011_006&r=pub |