nep-pub New Economics Papers
on Public Finance
Issue of 2013‒07‒28
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Income Taxation of U.S. Households: Facts and Parametric Estimates By Nezih Guner; Remzi Kaygusuz; Gustavo Ventura
  2. Corporate Effective Tax Rates in Asian Countries By Masaaki Suzuki
  3. Property Tax Salience and Payment Delinquency By Bradley, Sebastien
  4. How to Enforce Value-Added Tax? The Role of Inter-Sectoral Linkages By Hoseini, M.
  5. Tax evasion, social norms and economic growth By Bethencourt, Carlos; Kunze, Lars
  6. Taxpaying response of small firms to an increased probability of audit: some evidence from Italy By Carlo Fiorio; Stefano Iacus; Alessandro Santoro
  7. Why has social security become less pro poor? By Bea Cantillon; Natascha Van Mechelen; Olivier Pintelon; Aaron Van den Heede

  1. By: Nezih Guner; Remzi Kaygusuz; Gustavo Ventura
    Abstract: We use micro data from the U.S. Internal Revenue Service to document how Federal Income tax liabilities vary with income, marital status and the number of dependents. We report facts on the distributions of average taxes, properties of the joint distributions of taxes paid and income, and discuss how taxes are affected by marital status and the number of children. We also provide multiple parametric estimates of tax functions for use in applied work in macroeconomics and public finance.
    Keywords: taxation, tax progressivity, households
    JEL: E62 H24 H31
    Date: 2013–07
  2. By: Masaaki Suzuki (The Research Center for Advanced Policy Studies, Institute of Economic Research, Kyoto University)
    Abstract: This paper aims to (a) calculate Devereux and Griffith’s (2003) forward-looking effective tax rates for 12 Asian countries over a span of 30 years, (b) show the impact of tax holidays on the effective tax rate in Asian countries, and (c) empirically explore the possibility of tax competition among Asian countries. Through relevant analyses, I arrive at three key conclusions. First, while small countries with little rent in domestic markets set their effective tax rates at almost zero, large countries maintain much higher effective tax rates. Second, for countries that have generous capital allowance systems, tax holidays may lead to a rise in not only the effective marginal tax rates (EMTR), but also the effective average tax rates (EATR). Third, some Asian countries may engage in tax competition, at least over the EATR, for a limited period of time. However, while some countries have raised their effective tax rates in recent years, others have continued with tax reductions. These results indicate that the recent tax interactions among Asian countries differ from the simpler interactions seen among the European countries.
    Keywords: Corporate income tax, Effective tax rates, Tax incentives, Tax competition
    JEL: H25 H87
    Date: 2013–07
  3. By: Bradley, Sebastien (Department of Economics & International Business LeBow College of Business Drexel University)
    Abstract: Despite only modest supporting evidence, shocks to households' personal finances are commonly cited as one of the principal causes of homeowner defaults. In this paper, I investigate the extent to which different component sources of annual variation in property tax obligations influence the probability and magnitude of property tax delinquency are likely precursor to mortgage default. Under Michigan's system of property tax limitations, rational homeowners should readily anticipate changes in tax liability, making such changes an unlikely cause of delinquency, regardless of the underlying source. Looking at tax payment records for the city of Ann Arbor, Michigan for the period 2006-2009, I instead find that a household's probability of making late payments, the tardiness of their payments, the amount by which they underpay, or the amount of their resulting interest penalties are all generally greater when changes in property taxes arise through less salient features of the Michigan tax system. This suggests that homeowners, especially new homebuyers, do not rationally anticipate their future tax bills and may instead bear a heavy cost for their inattention to the property tax system.
    Keywords: property taxes; delinquency; default; tax salience; limited attention
    JEL: D14 D84 H21 H24 H31
    Date: 2012–11–01
  4. By: Hoseini, M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper models and empirically tests a self-enforcing feature of the value added tax (VAT) which is absent in the theory: An incentive that makes formal traders buy from suppliers who pay VAT too. In addition, it explores how the government can deploy this feature to enforce VAT more efficiently by reallocating the enforcement spendings among different sectors. The results suggest that the government should identify the non-compliant firms more strictly in the backwardly linked sectors {which buy their inputs from the others{ and focus on revealing within-firm information. In contrast, in forwardly linked industries, the government should zoom on double checking the transaction records with the corresponding input credit claims. Empirical evidence from Indian service sector enterprises strongly confirms the existence of VAT self-enforcement effect, even in the absence of government punishments.
    Keywords: Value-added tax;Informality;Tax enforcement;Linkage analysis.
    JEL: H26
    Date: 2013
  5. By: Bethencourt, Carlos; Kunze, Lars
    Abstract: This paper proposes a theoretical model to account for the most relevant micro- and macroeconomic empirical facts in the tax evasion literature. To do so, we integrate tax morale into a dynamic overlapping generations model of capital income tax evasion. Tax morale is modeled as a social norm for tax compliance. It is shown that accounting for such nonpecuniary costs of evasion may not only explain (i) why some taxpayers never evade even if the gamble is profitable, and (ii) how a higher tax rate can increase evasion, but also that (iii) the share of evaded taxes over GDP decreases with the stage of economic development and (iv) that tax morale is positively correlated with the level of GDP per capita as suggested by recent empirical evidence. Finally, a higher tax rate increases aggregate evasion as well as the number of evaders in the economy when taxpayers decisions are interdependent.
    Keywords: tax evasion, social norms, overlapping generations, economic growth
    JEL: D91 H26 Z13
    Date: 2013–07–18
  6. By: Carlo Fiorio; Stefano Iacus; Alessandro Santoro
    Abstract: Income tax evasion by small rms has been seldom investigated mostly because of lack of data. In this paper we use a large data set produced by the Italian Revenue Agency for this project to analyse a recent policy to contrast business income tax evasion. Since 1998 Italy has adopted a method to audit small businesses (Studi di Settore), which denes the probability of a tax audit based on presumptive and reported levels of sales. In 2007 a letter campaign was implemented by the Italian Revenue Agency aimed at reducing manipulation of reports by threatening that if the "anomaly" was repeated with the 2008 tax declaration, the probability of a thorough tax audit would have drastically increased. By using dierence in dierence with matching methods on a sample of about 50,000 treated firms and 95,000 controls, we find that the letter campaign had a positive and statistically signicant average effect on treated firms. A cost-benet analysis of the policy suggests that the letter campaign generated a net increase of revenues of about 140 million euros.
    Keywords: Business Taxation, Tax Compliance, Coarsened Exact Matching, Studi di Settore
    JEL: H26 H25 C13
    Date: 2013–07
  7. By: Bea Cantillon; Natascha Van Mechelen; Olivier Pintelon; Aaron Van den Heede
    Abstract: The present paper argues that we are witnessing an increase of the tensions between the three main goals of social security systems (poverty alleviation, securing living standards and prevention) and that, as a consequence, the poverty-reducing capacity of social transfers has come under pressure. The paper focuses on the working age population in 25 EU countries and on the good years before the crisis. Three different data sources are used: ECHP, its successor EU-SILC and the German SOEP. The paper augments the traditional pre-post approach by considering more direct policy indicators such as spending levels, observed average benefit levels and theoretical tax benefit packages and by focussing on the distinction between work-poor and work-rich households. We find that in many countries the relative decline in poverty reduction has primarily affected work-poor households. This observation is confirmed by more direct policy indicators. It may support the hypothesis that in many countries the poverty alleviation function of social protection has come under pressure as a consequence of a shift of attention towards preventing benefit dependency by recommodification on the one hand and ‘securing living standards’ for working families on the other hand.
    Keywords: Europe, welfare state, poverty, redistribution, work intensity, social exclusion
    JEL: D31 I38 O52
    Date: 2013–07

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