nep-pub New Economics Papers
on Public Finance
Issue of 2013‒05‒24
eleven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. “The Impact of Micro-simulation and CGE modeling on Tax Reform and Tax Advice in Developing Countries”: A Survey of Alternative Approaches and an Application to Pakistan By Andrew Feltenstein; Luciana Lopes; Janet Porras Mendoza; Sally Wallace
  2. Optimal Dynamic Nonlinear Income Taxes: Facing an Uncertain Future with a Sluggish Government By Berliant, Marcus; Fujishima, Shota
  3. Making the Property Tax Work By Roy Kelly
  4. Subsidies for substitutes? : new evidence on deadweight loss and substitution effects of a wage subsidy for hard-to-place job-seekers By Moczall, Andreas
  5. Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals? By Musharraf Cyan; Jorge Martinez-Vazquez; VIoleta Vulovic
  6. Taxing the Small: Fostering Tax Compliance Among Small Enterprises in Developing Countries By William F. Fox; Matthew Murray
  7. Foreign Advice and Tax Policy in Developing Countries By Richard M. Bird
  8. Tax Policy in an Economic Federation With Proportional Membership Fees By Sjögren, Tomas
  9. The Impact of Tax Incentives to Stimulate Investment in South Africa By Estian Calitz; Sally Wallace; Le Roux Burrows
  10. Environmental Taxation Evolution in Ukraine: Trends, Challenges and Outlook By Shkarlet, Serhiy; Petrakov, Iaroslav
  11. The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally By Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo

  1. By: Andrew Feltenstein (Andrew Young School of Policy Studies, Georgia State University); Luciana Lopes; Janet Porras Mendoza (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Sally Wallace (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Computational general equilibrium models (CGE) and micro-simulation models (MSM) each have their own sets of strengths and weaknesses. Both have been widely used for the analysis of fiscal policies in developing countries, and many attempts have been made to link the two models, thereby combining their relative strengths. We survey a broad literature that uses a variety of approaches to apply linked CGE and MSM models to analyze fiscal policies, in particular taxes and tariffs, in developing countries. We conclude that the “top down” approach, in which the aggregate outputs of the CGE model feed into the MSM, is the most commonly used. Nonetheless, a “bottom up” approach, in which the MSM generates estimated parameters, such as effective tax rates, which are then used as inputs to the CGE, may also be quite useful. As an example, we also develop both CGE and MSM models of Pakistan in order to indicate the relative uses of each model, although we have not at this time linked the two models.
    Keywords: Computable General Equilibrium, Micro-simulation, Fiscal Policy, Pakistan
    Date: 2013–04–07
  2. By: Berliant, Marcus; Fujishima, Shota
    Abstract: We consider the optimal nonlinear income taxation problem in a dynamic, stochastic environment when the government is sluggish in the sense that it cannot change the tax rule as uncertainty resolves. We argue that the zero top marginal tax rate result in static models is of little practical importance because it actually holds only when the top earner in the initial period receives the highest shock in every period.
    Keywords: optimal income taxation; new dynamic public finance
    JEL: H21
    Date: 2013–05–17
  3. By: Roy Kelly (Duke Center for International Development Sanford School of Public Policy, Duke University)
    Abstract: As with any reform, making the property tax work requires visionary leadership, an appropriate policy framework, strong administrative capacity, and appropriate incentives to mobilize the political, administrative and popular support needed to enhance property tax revenues, equity and efficiency. This paper focuses on these requirements for successful property tax reform, identifying the key policy and administrative components and possible strategies needed to make the property tax work. Part 1 outlines the broader public sector reform environment needed to facilitate and support sustainable property tax reform. Part 2 identifies the policy and administration determinants affecting the realization of property tax revenue, equity and efficiency outcomes. Part 3 focuses on the ingredients needed to design a successful reform implementation strategy, while Part 4 summarizes the key recommendations for making the property tax work, especially in transitional and developing countries.
    Date: 2013–04–07
  4. By: Moczall, Andreas (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper estimates substitution effects of the German active labour market programme 'JobPerspektive'', a wage subsidy for hard-to-place welfare recipients. Using a novel panel of the entire population of German establishments with full information on unsubsidized and subsidized employment, counterfactual employment levels of subsidized employers are modelled by way of matching on the propensity score of receiving the subsidy. Using the same method, the substitution of particular groups of workers, including those subsidized by other programme types, is investigated as well. Results provide little evidence for widespread substitution of regular workers due to receiving this particular subsidy; in fact, regular employment is somewhat increased in West Germany as a result of subsidization. Furthermore, JobPerspektive is being used by employers in lieu of wage-paying work opportunities, and receiving JobPerspektive causes establishments to employ more workers with regular hiring subsidies." (Author's abstract, IAB-Doku) ((en))
    Keywords: Langzeitarbeitslose, schwervermittelbare Arbeitslose, arbeitsmarktpolitische Maßnahme, Wirkungsforschung, Lohnkostenzuschuss, Arbeitslosengeld II-Empfänger, berufliche Reintegration, Beschäftigungseffekte, Eingliederungszuschuss, Arbeitsgelegenheit
    JEL: H25 M51 C31
    Date: 2013–05–16
  5. By: Musharraf Cyan (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); VIoleta Vulovic (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: In this paper we attempt to take a fresh look at the classical question of the determinants of tax effort. Our goal is to better understand the fundamental economic logic of the different approaches that have been used in the previous literature, consider alternative measurements which may provide a more direct intuition of what the concept of tax effort attempts to measure, and to compare quantitatively the rankings of tax effort produced by all these different approaches. As we see it, the fundamental issue is how to move forward toward a definition of tax effort that has a higher relevance to the developmental needs and budgetary ambitions of a country and as an indicator of potential tax reform needs. Fundamentally, all tax effort indicators are calculated by comparing actual collection performance against a measure of potential collections. This definitional choice lays out several dimensions for the conduct of tax policy in a country. These include the need for reform to raise revenues with reference to some potential, the desirable timing and urgency of those reforms, and the extent of the gains in national welfare that are achievable with these reforms. While the first two dimensions have been examined in different ways in the previous literature, in this paper, for the first time in this literature, we will examine how much the two different approaches to estimation of tax effort matter as compared to those conventionally used. In addition, and also for the first time in this literature, in this paper we argue for the need to explicitly link the adequacy of tax effort with the specific expenditure goals of government and their associated gains in national welfare.
    Date: 2013–04–07
  6. By: William F. Fox (Center for Business and Economic Research and Department of Economics, University of Tennessee.); Matthew Murray (Baker Center for Public Policy, Center for Business and Economic Research and Department of Economics, University of Tennessee)
    Abstract: We first discuss a more nuanced view of the tax compliance game from the evolving perspective of behavioral economics. This discussion is followed by a more traditional analysis of issues related to taxation of the small drawing on recent insights and policy interventions. Our discussion generally blends issues of tax structure with various facets of tax administration and enforcement. In most instances the tax instrument in question is the VAT since it is the dominant revenue source in most developing countries, though we recognize there are compliance problems with all revenue instruments.
    Date: 2013–04–07
  7. By: Richard M. Bird (University of Toronto)
    Abstract: Fifty years of experience tells us that the right game for tax researchers and outside agencies interested in fostering better sustainable tax systems in developing countries researchers is not the short-term political game in which policy decisions are made. The right game for them is instead the long-term one of building up the institutional capacity both within and outside governments to articulate relevant ideas for change, to collect and analyze relevant data, and of course to assess and criticize the effects of such changes as are made. Tax researchers in developing countries can and should play an active role in all these activities. To do so, however, they often need considerably more and more sustained support from academic institutions abroad as well as from international agencies than is now available. Such long-term ‘institution-building’ activities are seldom immediately rewarding. They appear at present to be out of fashion with international agencies concerned with development, where most efforts at present seem to focus on designing and implementing ever more rigorous ‘benchmarking’ schemes. Nonetheless, the long-term institution-building approach seems still to provide the most useful way in which foreigners may perhaps be able to assist in the formidable and on-going task of achieving more efficient, equitable, effective, and sustainable tax systems in developing countries.
    Date: 2013–04–07
  8. By: Sjögren, Tomas (Department of Economics, Umeå School of Business and Economics, Umeå University)
    Abstract: A significant part of the revenue in the EU budget is raised via a GNI-based resource. The purpose of this paper is to analyze how this way of raising funds to the central authority in an economic federation affects the tax policy implemented by the lower level jurisdictions. This question is analyzed both when labor is immobile, as well as mobile, between the jurisdictions. A key result is that if the government in a lower level jurisdiction acts as a Nash follower, then it has an incentive to implement a distortionary tax on labor whereas if the lower level government is able to act as a strategic leader within the federation, then the incentive to distort the labor market may be redundant.
    Keywords: efficiency; optimal taxation; economic federation
    JEL: H21 H41 H70
    Date: 2013–05–16
  9. By: Estian Calitz (University of Stellenbosch, South Africa); Sally Wallace (Andrew Young School of Policy Studies, Georgia State University); Le Roux Burrows (University of Stellenbosch, South Africa)
    Abstract: The purpose of this paper is, very generally, to provide a framework and potential methodology of analysis of tax incentives in one country — South Africa. As incentives are often specific and targeted, the precise methods needed to analyze the effectiveness of incentives may well differ among types of incentives. However, by positing a framework for evaluation based on basic economic principles, we believe that transparency, accountability and rigorous evaluation of individual incentives or regarding the choice of incentives may be enhanced.
    Date: 2013–04–07
  10. By: Shkarlet, Serhiy; Petrakov, Iaroslav
    Abstract: Recent development trends of environmental taxation in Ukraine in context of the 2011 Tax Reform are analysed. Institutional, fiscal and security challenges for green taxes evolution during economic downturn and recession are summarized. Further modernization outlook for environment-oriented fiscal instruments in Ukraine considering European experience is suggested.
    Keywords: environmental taxes, fiscal instruments, trends, challenges
    JEL: H23 O13 O44 P28 P48 Q53 Q56 Q58
    Date: 2013–01–15
  11. By: Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo
    Abstract: We propose the minimum approval mechanism (MAM) for a standard linear public good environment with two players. Players simultaneously and privately choose their contributions to the public good in the first stage. In the second stage, they simultaneously decide whether to approve the otherfs choice. Both contribute what they choose in the first stage if both players approve; otherwise, both contribute the minimum of the two choices in the first stage. The MAM implements the Pareto-efficient allocation in backward elimination of weakly dominated strategies (BEWDS) and is unique under plausible conditions. Contributions in the MAM experiment overall averaged 94.9%. The data support BEWDS rather than subgame perfect Nash equilibria. Quantifying subjectsf responses to the questionnaire showed that the majority of subjects in the MAM found a heuristic or an algorithm named diagonalization and supported the notions of minimax regret and iterated best response, all of which mimic BEWDS outcomes.
    Date: 2013–05

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