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on Public Finance |
| By: | Florian Scheuer |
| Abstract: | This paper analyzes Pareto optimal non-linear taxation of profits and labor income in a private information economy with endogenous firm formation. Individuals differ in both their skill and their cost of setting up a firm, and choose between becoming workers and entrepreneurs. I show that a tax system in which entrepreneurial profits and labor income must be subject to the same non-linear tax schedule makes use of general equilibrium (or "trickle down'') effects through wages to indirectly achieve redistribution between entrepreneurs and workers. As a result, constrained Pareto optimal policies can involve low marginal tax rates at the top and, if available, input taxes that distort the firms' input choices. However, these properties disappear when a differential tax treatment of profits and labor income is possible. In this case, redistribution is achieved directly through the tax system rather than "trickle down'' effects, and production efficiency is always optimal. |
| JEL: | D5 D8 E2 E6 H2 J2 J3 J6 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19235&r=pub |
| By: | Gemmell, Norman; Hasseldine, John |
| Abstract: | The work of Feldstein (1995, 1999) has stimulated substantial conceptual and empirical advances in economists’ approaches to analysing taxpayers’ behavioural responses to changes in tax rates. Meanwhile, a largely independent literature proposing and applying alternative measures of tax compliance has also developed in recent years, which has sought to provide tax agencies with tools to identify the extent of tax non-compliance as a first step to designing policies to improve compliance. In this context, measures of ‘tax gaps’ – the difference between actual tax collected and the potential tax collection under full compliance with the tax code – have become the primary measures of tax non-compliance via (legal) avoidance and/or (illegal) evasion. In this paper we argue that the tax gap as conventionally defined is conceptually flawed because it fails to capture behavioural responses by taxpayers. We show that, in the presence of such behavioural responses, tax gap measures both for indirect taxes (such as the ‘VAT-gap’) and direct (income) taxes exaggerate the degree of noncompliance. Further, where these conventional tax gap measures motivate reforms designed to increase the tax compliance rate, they will likely have a tax base reducing effect and hence generate a smaller increase in realised tax revenues than would be anticipated from the tax gap estimate. |
| Keywords: | Behavioural responses, Taxpayers, Tax rate changes, Tax policy, Compliance, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:2853&r=pub |
| By: | Angel Solano-Garcia (Globe and Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | This paper analyzes the political economy of income redistribution when voters are concerned about tax compliance. We consider a two stagemodel where there is a two party competition over the tax rate in the first stage and voters decide about their level of tax compliance in the second stage. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. We calibrate the model for an average of EU-27 countries. Numerical simulations provide the tax rates proposed by the two parties and the level of tax compliance. We find that a decrease in confidence in tax morale, and an increase in parties’ uncertainty about the preferences of the median voter increase the probability that the party offering the lowest income tax will win and decrease tax compliance. |
| Keywords: | tax evasion, ideological parties, income redistribution, ethical voters. |
| JEL: | D72 H26 |
| Date: | 2013–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:13/06&r=pub |
| By: | Jörg Spiller (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)) |
| Abstract: | In a laboratory experiment groups of four played a 15-period Public Good game. Each period a player could either invest in a green sector or in a more profitable but polluting brown sector. The pollutant accumulated and decreased the players’ income in all following periods. We conducted several treatments including the existence of a future generation. In the latter case subjects were told that their final stock would be forwarded to another group in a later session. The framework allowed investigating learning, the effects of communication and the possibly different reactions to self-produced and inherited pollution. The most interesting result is that the existence of heirs restricts pollution. We find that the result may be driven partly by thoughtfulness and partly by the induced motivation for longer-term planning. |
| Keywords: | Experimental Economics, Public Good, Dynamic, Environmental Eco- nomics, Inter Generation |
| JEL: | H41 C91 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:euv:dpaper:008&r=pub |
| By: | Rudiger Ahrend; Marta Curto-Grau; Camila Vammalle |
| Abstract: | The paper explores interrelations between the fiscal situation of sub-national and central governments, or – put differently – whether and how sub-national and central governments contribute to each other’s fiscal difficulties. The first part of the paper examines sub-national government policies that may negatively affect the fiscal situation of the central government. Based on a new cross-country data-set at the level of individual regions, it examines structural factors that increase the probability of sub-national entities accumulating amounts of debt that may ultimately turn out to be unsustainable. The underlying idea is to explore to what degree such debt levels could result from moral hazard-driven behaviour at the regional level. The second part of the paper examines whether and how national governments hand the burden of fiscal adjustment down to sub-national levels, mainly looking at examples from the wave of fiscal adjustments in the wake of the 2007-09 global financial crisis.<BR>Cette étude examine dans quelle mesure la situation budgétaire des gouvernements infra-nationaux et celle des gouvernements centraux sont liées – ou, exprimé différemment, comment les gouvernements infra-nationaux et centraux contribuent à leurs difficultés budgétaires réciproques. La première partie de l’étude analyse les politiques conduites par les gouvernements infra-nationaux pouvant affecter négativement la situation budgétaire du gouvernement central. Une analyse des facteurs structurels susceptibles d’accroître la probabilité d’accumulation de dette par les entités infra-nationales (et pouvant au final la rendre insoutenable) est alors conduite. Basée sur une nouvelle base de données au niveau regional pour six pays de l’OCDE, elle cherche à déterminer à quel point ces niveaux de dette sont susceptibles d’être influencés par des comportements d’aléa moral de la part des autorités régionales. La seconde partie de cette étude examine la manière dont les gouvernements centraux transfèrent le poids de l’ajustement budgétaire aux gouvernements infra-nationaux, en se concentrant sur des épisodes de consolidation budgétaire ayant suivi la crise financière internationale de 2007-2009. |
| Keywords: | public debt, sub-national government, bailouts, fiscal stress, plan de sauvetage, stress budgétaire, gouvernements infra-nationaux |
| JEL: | H12 H70 H74 H81 |
| Date: | 2013–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2013/5-en&r=pub |
| By: | Omar A Aziz; Christopher Ball; John Creedy; Jesse Eedrah (The Treasury) |
| Abstract: | This paper examines the potential distributional impacts of demographic change, particularly population ageing, and changes to labour force participation that are projected to arise over the next 50 years. The approach involves calibration weighting of the Treasury’s microsimulation model, Taxwell, based on the New Zealand Household Economic Survey. The weights are adjusted for each projection year to ensure that a range of population aggregates (by age and gender) match the projected values provided by Statistics New Zealand. Measures of income inequality and poverty, along with the incidence of income tax, Goods and Services Tax and a number of components of government spending (namely health and education) across age groups, are obtained. The results suggest that population ageing and expected changes in labour force participation, in isolation, do not have a significant impact on population-level measures of income inequality. |
| Keywords: | Inequality; population ageing; survey calibration; poverty; fiscal incidence |
| JEL: | H24 I14 I24 J1 H24 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:13/13&r=pub |