nep-pub New Economics Papers
on Public Finance
Issue of 2014‒01‒10
24 papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How should financial intermediation services be taxed? By Ben Lockwood
  2. VAT Treatment of Financial Institutions: Implications for the Real Economy By Fatih Yilmaz
  3. Cross-border loss offset can fuel tax competition By Andreas Hau fler; Mohammed Mardan
  4. Consumption and cash-flow taxes in an international setting By Alan J. Auerbach; Michael P. Devereux
  5. The elasticity of taxable income and income-shifting between tax bases: what is “real” and what is not? By Jarkko Harju; Tuomas Matikka
  6. The effect of awareness and incentives on tax evasion By Annette Alstadsæter; Martin Jacob
  7. And yet it moves: taxation and labour mobility in the 21st century By Reuven S. Avi-Yonah
  8. Reforming an asymmetric union: on the virtues of dual tier capital taxation By Andreas Hau fler; Christoph Lulfesmann
  9. Thin capitalization rules and multinational firm capital structure By Jennifer Blouin; Harry Huizinga; Luc Laeven; Gaëtan Nicodème
  10. Debt and tax losses: the effect of tax asymmetries on the cost of capital and capital structure By MATT KRZEPKOWSKI
  11. Temporary Increase in Annual Investment Allowance: A 2013 Finance Act Note By Andrew Harper; Li Liu
  12. Taxation and corporate risk-taking By Dominika Langenmayr; Rebecca Lester
  13. The investment effect of taxation: evidence from a corporate tax kink By Anne Brockmeyer
  14. Learning and international policy diffusion: the case of corporate tax policy By Johannes Becker; Ronald B. Davies
  15. Can taxes tame the banks? Evidence from European bank levies By Michael P. Devereux; Niels Johannesen; John Vella
  16. Democracy of "Taxation-Redistribution" and Peacetime Budget Deficit By Konstantin Yanovskiy; Sergey Zhavoronkov; Dmitry Shestakov
  17. Taxing Cash to Fight Collaborative Tax Evasion? By Giovanni Immordino; Francesco Flaviano Russo
  18. Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap By Marika Cabral; Neale Mahoney
  19. Comparing the incidence of taxes and social spending in Brazil and the United States By Sean Higgins; Nora Lustig; Whitney Ruble; Timothy Smeeding
  20. Do the haves come out ahead in tax litigation? An empirical study of the dynamics of tax appeals in the UK By Michael Blackwell
  21. CFC legislation, passive assets and the impact of the ECJ’s Cadbury-Schweppes decision By Martin Ruf; Alfons J. Weichenrieder
  22. Swedish Wealth Taxation, 1911–2007 By Du Rietz, Gunnar; Henrekson, Magnus
  23. The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview By Nora Lustig; Florencia Amábile; Marisa Bucheli; George Gray Molina; Sean Higgins; Miguel Jaramillo; Wilson Jiménez Pozo; Veronica Paz Arauco; Claudiney Pereira; Carola Pessino; Máximo Rossi; John Scott; Ernesto Yáñez Aguilar
  24. "Intensive Margins, Extensive Margins, and the Spousal Allowances in the Japanese System of Personal Income Taxes: A Discrete Choice Analysis" By Shun-ichiro Bessho; Masayoshi Hayashi

  1. By: Ben Lockwood (CBT, CEPR and Department of Economics, University of Warwick)
    Abstract: This paper considers the optimal taxation of savings intermediation services in a dynamic general equilibrium setting, when the government can also use consumption, income and profit taxes. When 100% taxation of profit is available, taxes on services supplied to firms should be deductible from profit, implying the optimality of a VAT-type tax. As for the rate of tax, in the steady state, an optimal arrangement is to set it equal to the rate of tax on capital income, not consumption. In turn, the capital income tax is zero when the when an unrestricted profit tax is available, but in the more realistic case when such a tax is not available, this rate can be positive or negative, but generally different to the optimal rate of tax on consumption.
    Keywords: financial intermediation services, tax design, banks, payment services
    JEL: G21 H21 H25
    Date: 2013
  2. By: Fatih Yilmaz (University of Calgary)
    Date: 2013–11–02
  3. By: Andreas Hau fler (University of Munich and CESifo); Mohammed Mardan (University of Munich)
    Abstract: Following recent court rulings, cross-border loss compensation for multinational firms has become a major policy issue in Europe. This paper analyzes the effects of introducing a coordinated cross-border tax relief in a setting where multinational firms choose the size of a risky investment and host countries noncooperatively choose tax rates. We show that coordinated cross-border loss compensation may intensify tax competition when, following current international practice, the parent firm's home country bases the tax rebate for a loss-making subsidiary on its own tax rate. In equilibrium, tax revenue losses may thus be even higher than is implied by the direct effect of the reform. In contrast, tax competition is mitigated when the home country bases its loss relief on the tax rate in the subsidiary's host country.
    Keywords: cross-border loss relief, tax competition, multinational rms
    JEL: H25 H32 F23
    Date: 2013
  4. By: Alan J. Auerbach (University of California, Berkeley); Michael P. Devereux (Oxford University Centre for Business Taxation)
    Abstract: We model the effects of consumption-type taxes which differ according to the base and location of the tax. Our model incorporates a multinational producing and selling in two countries with three sources of rent, each in a different location: a fixed basic production factor (located with initial production), mobile managerial skill, and a fixed final production factor (located with consumption). In the general case, we show that for national governments, there are tradeoffs in choosing between alternative taxes. In particular, a cash-flow tax on a source basis creates welfare-impairing distortions to production and consumption, but is partially incident on the owners of domestic production who may be non-resident. By contrast, a destination-based cash-flow tax does not distort behavior, but is incident only on domestic residents. In the alternative case with the returns to the fixed factors accruing to domestic residents, the only distortion from the source-based tax is through the allocation of the mobile managerial skill. In this case, the source-based tax is also incident only on domestic residents, and is dominated by an equivalent tax on a destination basis.
    Keywords: Cash-flow taxes
    JEL: H25
    Date: 2013
  5. By: Jarkko Harju (Government Institute for Economic Research, Finland); Tuomas Matikka (Government Institute for Economic Research, Finland)
    Abstract: Previous literature shows that income taxation especially affects the behaviour of business owners and entrepreneurs. However, it is still unclear how much of the response is due to changes in effort and other real economic activity, and how much is due to tax avoidance and tax evasion. This is important because the nature of the response largely affects the welfare implications and policy recommendations. In this paper we distinguish between real responses and tax-motivated income- shifting between tax bases using the widely-applied elasticity of taxable income (ETI) framework. We use extensive register-based panel data on both the owner and firm-level, which enable us to carefully distinguish between real effects and income-shifting among the owners of privately held corporations in Finland. Our results show that income-shifting accounts for over two thirds of the overall ETI. As the shifted income is also taxed, this significantly decreases the marginal excess burden of income taxation compared to the standard model in which the overall ETI defines the welfare loss. However, in addition to income-shifting effects, we find that dividend taxation significantly affects the real behaviour of the owners.
    Keywords: Personal income taxation, Elasticity of taxable income, Business owners, Tax avoidance
    JEL: H24 H25 H32
    Date: 2013
  6. By: Annette Alstadsæter (University of Oslo); Martin Jacob (WHU – Otto Beisheim School of Management)
    Abstract: We examine the role of tax incentives and tax awareness on tax evasion. We are able to observe tax evasion of business owners in rich Swedish administrative panel data. During the period of 2006-2009, around 5% of tax returns overstate a claimed dividend allowance even after the tax authority has approved the returns. Tax awareness decreases and complexity increases the likelihood of misreporting. Our results indicate that some of the observed misreporting could be accidental while some misreporting is deliberate tax evasion. We identify a positive and significant effect of tax rates on tax evasion by exploiting a large kink in the tax schedule.
    Keywords: Tax evasion, tax compliance, misreporting, tax awareness, income taxation
    JEL: H26 H24 D14
    Date: 2013
  7. By: Reuven S. Avi-Yonah (University of Michigan)
    Abstract: A central premise of tax scholarship of the last thirty years has been the greater mobility of capital than labour. Recently, scholars such as Edward Kleinbard have recommended that the US adopt a variant of the “dual income tax” model used by the Scandinavian countries, under which income from capital is subject to significantly lower rates than labour income because of its supposedly greater mobility. This article argues that the premise upon which this argument is built is mistaken, because for individual US taxpayers (as opposed to corporations), there are significant limitations on their ability to avoid tax by moving their capital overseas. Moreover, if we focus on those taxpayers that pay the bulk of the income tax (i.e., the upper middle class and the rich), the data suggest that their ability to legally avoid taxation by expatriation is not significantly lower than their ability to evade it by moving capital, and lower income taxpayers are able to avoid both the income tax and the payroll tax (as well as a VAT) by emigration. The article then develops the policy implications, suggesting that (contrary to recent legislative trends) income from labour and capital should be subject to the same tax rates, but that these rates should be congruent with the price the US population is willing to pay for public services.
    Date: 2013
  8. By: Andreas Hau fler (University of Munich and CESifo); Christoph Lulfesmann (Simon Fraser University and CESifo)
    Abstract: The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the effects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, federal tax rate in the first stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism effectively reduces competition for mobile capital between the members of the union. Moreover, it distributes the gains across the heterogeneous states in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. Finally, we present simulation results, and show that a dual structure of capital taxation has advantages even when side payments are feasible.
    Keywords: capital tax competition, dual tier taxation, international unions
    JEL: H25 H77 H87
    Date: 2013
  9. By: Jennifer Blouin (University of Pennsylvania); Harry Huizinga (Tilburg University and CEPR); Luc Laeven (International Monetary Fund and CEPR); Gaëtan Nicodème (European Commission, ULB, CESifo and CEPR)
    Abstract: This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the (internal) leverage of foreign affiliates of US multinationals, we find that thin capitalization rules affect multinational firm capital structure in a significant way. Specifically, restrictions on an affiliate’s ratio of overall debt to assets reduce this ratio on average by 1.9%, while restrictions on the ratio of an affiliate’s borrowing from the parent company to its equity reduce this ratio by 5.7%. Also, restrictions on borrowing from the parent reduce the overall debt to assets ratio of the affiliate by 3.5%, which shows that rules targeting internal debt have an indirect effect on the overall indebtedness of affiliate firms. Thin capitalization rules mitigate the traditional effect of corporate taxation on affiliate debt, while their impact on affiliate leverage is higher if their application is automatic rather than discretionary. Finally, we exploit variation over time in thin capitalization rules to show that the first year impact of new capitalization rules on affiliate leverage is significant albeit less than its long-term effect. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on capital structure within multinational firms.
    Keywords: Thin capitalization rule; Multinational firm; Capital structure; Taxation
    JEL: G32 H25
    Date: 2013
  10. By: MATT KRZEPKOWSKI (University of Calgary)
    Abstract: Firms with positive income pay corporate taxes on profits and reduce their total tax burden by claiming various credits and deductions. Firms with negative income and no past profits only claim tax offsets to lower future taxes payable, realising both taxes on production and investment incentives when they become profitable. This paper looks at the effect of this asymmetric system of partially offsetting losses on the cost of capital. I find changes in marginal effective tax rates depend on the riskiness of investment. Riskless investments see their corporate tax liabilities deferred into the future under a partial-loss system, decreasing their marginal effective tax rate by between 2 and 4%. Risky investments have higher marginal effective tax rates by between 2 and 7%, as they will pay corporate tax immediately if successful and delay receiving investment tax credits and deductions if unsuccessful. Included in these estimates are changes in the effective tax rate due to changes in the capital structure of firms. Loss firms are unable to immediately deduct interest payments, lowering the optimal debt ratio and increasing the cost of financing. I estimate financial decisions under a partial loss system decrease the industry-wide debt-asset ratio between 2-5 percentage points, but these changes have a minimal effect on effective tax rates.
    Date: 2013
  11. By: Andrew Harper (New Street Chambers, Leicester); Li Liu (Oxford University Centre for Business Taxation)
    Abstract: In this Finance Act 2013 (FA 2013) note we review and discuss the implication of the temporarily increase in the level of the annual investment allowance (AIA) from £25,000 to £250,000 for expenditure incurred during the calendar years 2013 and 2014. We first review the provisions in detail, drawing attention to the potential for complexity in calculating the taxpayer's entitlement. We then discuss the investment incentive effects that may arise from the AIA increase, including a reduction in the user cost of capital and an increase in the additional cash available for investment. Our analysis of aggregate statistics on the population of AIA claimants in the UK between 2008-09 and 2011-12 suggests that the temporary AIA increase is likely to benefit only a narrow range of firms by providing them with a valuable windfall subsidy, resulting a sizable cost to the Exchequer.
    Keywords: AIA Allowances, Corporate Investment
    JEL: H25
    Date: 2013
  12. By: Dominika Langenmayr (University of Munich); Rebecca Lester (Massachusetts Institute of Technology)
    Abstract: In the recent period of low growth, many governments look for ways to encourage economic activity. Risky investment by firms is an important source of macroeconomic growth. This paper contributes to recent literature on firm risk-taking by exploring if the corporate tax system can provide incentives for firms to undertake risky investment. To do so, we first model that the effect of taxes on firm risk-taking depends on loss offset possibilities. We then confirm our predictions empirically using a large international firm-level dataset. We find that firm risk-taking is positively and significantly related to the length of the tax loss carryback and carryforward periods and that this relation increases with the level of the tax rate. For firms that cannot expect to offset losses, higher tax rates reduce risk-taking. If loss offset is probable, however, corporate tax rates have a significant and positive effect on risk-taking.
    Keywords: Corporate taxation, firm risk-taking, net operating losses
    JEL: H25 H32 G32
    Date: 2013
  13. By: Anne Brockmeyer (London School of Economics)
    Abstract: This paper exploits bunching of firms at a tax kink as quasi-experimental variation to identify the effect of a tax rate change on investment, and explore how this effect interacts with variation in capital depreciation rates. The idea is that firms with a taxable income slightly above the kink have an incentive to reduce their income to bunch at the kink, and increasing investment is one possible strategy for that. This means that bunching of firms should be accompanied by a spike in investment at the kink. Building on the standard bunching framework, I estimate the frequency distribution of firms around the kink, and the share of bunchers with excess investments at the extensive and intensive margin. I apply this approach to administrative tax return data for the universe of UK firms from 2001-2007, and show that investment by small firms significantly responds to a tax rate change. I find large and significant spikes in the share of capital investors and median capital costs at the 10k kink. The spikes are larger in 2002-2005 when the kink is larger, and for quickly depreciating capital items, which yield larger tax reductions. I estimate that extensive margin investments explain 7.7-19.2% of bunching and intensive margin investments explain 4.3-16.8% of bunching. Evidence from subsample analysis supports the interpretation of the observed behaviour as real investment rather than evasion or avoidance.
    Keywords: Corporate taxation
    JEL: H25
    Date: 2013
  14. By: Johannes Becker (University of Münster); Ronald B. Davies (University College Dublin)
    Abstract: A recent empirical literature has arisen documenting the response of one nation?s policy choices, including tax, environmental, and labour policies, to that of others. This has been largely interpreted as evidence of competition, be it for mobile resources (like FDI, taxable book income etc.) or yardstick. We present a third explanation based on learning. When countries ?tax choices refl?ect private information about unobserved conditions, this encourages nations to update their policies not in order to retain investment or manipulate trade flows, but because the new information conveyed by overseas tax rates allows them to fi?ne-tune their own policies. With this ?social learning?, countries converge on their optimal policies faster than in isolation. Furthermore, this convergence implies a pattern of policy convergence often attributed to competition for mobile resources. The speed of this convergence is smaller in the presence of policy adjustment costs although it remains faster than convergence in isolation. In addition, adjustment costs result in inefficient policy adjustment because countries do not internalize the benefi?ts conveyed by their own adjustments to other nations. Finally, we show that these baseline results are robust to alternative network architectures, the choice of which can be used to replicate stylized facts found in the empirical tax competition literature.
    Keywords: social learning, tax competition
    JEL: H25 H32 H87
    Date: 2013
  15. By: Michael P. Devereux (Oxford University Centre for Business Taxation); Niels Johannesen (University of Copenhagen); John Vella (Oxford University Centre for Business Taxation)
    Abstract: In the wake of the fi?nancial crisis, a number of countries have introduced levies on bank borrowing with the aim of reducing risk in the ?financial sector. This paper studies the behavioural responses to the bank levies and evaluates the policy. We find that the levies induced banks to borrow less but also to hold more risky assets. The reduction in funding risk clearly dominates for banks with high capital ratios but is exactly offset by the increase in portfolio risk for banks with low capital ratios. This suggests that while the levies have reduced the total risk of relatively safe banks, they have done nothing to curb the risk of relatively risky banks, which presumably pose the greatest threat to fi?nancial stability.
    JEL: H25
    Date: 2013
  16. By: Konstantin Yanovskiy (Gaidar Institute for Economic Policy); Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Dmitry Shestakov (Gaidar Institute for Economic Policy)
    Abstract: The link between an introduction of the universal suffrage and the growth of government spending has been established in some literature (Meltzer, Richard, 1981, Aidt et al., 2006, Funk and Guthmann, 2006). In this article we try to identify a more detailed mechanism behind that link. So, we addressed to the conflict of interest of bureaucrats, and of the state subsidy beneficiaries. Historically the growth of government spending might be traced to the emergence of mainstream left parties, which openly stood in favor of the nanny state and government help from the cradle to the grave[1] as a priority over the provision of pure public goods. Finally we check the hypothesis that the growth of government care correlates with the chronic illnesses of the modern state finance like budget deficit, state debt and inflation.
    Keywords: Universal Suffrage; Left parties; Budget Deficit; Conflict of Interest.
    JEL: D72 D73 H62 N40
    Date: 2013
  17. By: Giovanni Immordino (Università di Salerno and CSEF); Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: We build a model of collaborative tax evasion where a buyer negotiates a price discount with a seller in exchange for not asking the receipt and paying cash, which eases tax evasion. Sellers and buyers are heterogeneous with respect to their honesty and to their cost of managing non cash payment instruments. We study the effect of two policy instruments, a tax rebate for the buyer that keeps the receipts and a tax on cash withdrawals (TCW), on tax evasion and government revenue. We find that a mix of these two instruments can reduce tax evasion and increase revenue. The TCW is effective only if sufficiently high, and it must be higher the higher the tax evasion in the country and the bigger the mass of individuals that typically pays in cash. We discuss the implementation problems of the TCW and we suggest how to partially overcome them.
    Keywords: collaborative tax evasion; tax on cash
    JEL: O17 H21
    Date: 2014–01–02
  18. By: Marika Cabral; Neale Mahoney
    Abstract: Most health insurance policies use cost-sharing to reduce excess utilization. The purchase of supplemental insurance can blunt the impact of this cost-sharing, potentially increasing utilization and exerting a negative externality on the primary insurance provider. This paper estimates the effect of private Medigap supplemental insurance on public Medicare spending using Medigap premium discontinuities in local medical markets that span state boundaries. Using administrative data on the universe of Medicare beneficiaries, we estimate that Medigap increases an individual’s Medicare spending by 22.2%. We find that the take-up of Medigap is price sensitive with an estimated demand elasticity of -1.8. Using these estimates, we calculate that a 15% tax on Medigap premiums would generate combined tax revenue and cost savings of $12.9 billion annually. A Pigouvian tax would generate combined annual savings of $31.6 billion.
    JEL: H2 I13
    Date: 2014–01
  19. By: Sean Higgins (Department of Economics, Tulane University, USA); Nora Lustig (Department of Economics, Tulane University, USA); Whitney Ruble (Department of Economics, Tulane University, USA); Timothy Smeeding (University of Wisconsin at Madison, USA)
    Abstract: We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil’s highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable.
    Keywords: Inequality, fiscal policy, taxation, social spending.
    JEL: D31 H22 I38
    Date: 2013–11
  20. By: Michael Blackwell (London School of Economics)
    Abstract: This paper considers which parties appeal in tax cases and which parties win such appeals. It adapts party capability theory to derive hypotheses concerning the relative advantages of (certain types of) taxpayers and HMRC, and how this may be aected by institutional factors, such as requirements for permission to appeal, and factors associated with the resources of the parties, such as legal representation. These hypotheses are then tested, using statistical methods, on a dataset assembled by the author of all appeals (including further appeals) from Special Commissioners' decisions since 1981. In doing such this paper both questions what the functions of an appeal system are, and whether the appeal system satises these, as well as addressing the question of whether certain large corporates enjoy favoured treatment by HMRC, which has been a recent issue of public concern in the UK.
    Date: 2013
  21. By: Martin Ruf (Eberhard Karls Universität Tübingen); Alfons J. Weichenrieder (Goethe Universität Frankfurt)
    Abstract: In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the ECJ decided that the UK CFC rules, which were implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses to which extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data we find evidence for an increased preference for low-tax European countries compared to non-European countries.
    Keywords: European Court of Justice, corporation tax, foreign direct investment, CFC regulation, passive investment
    JEL: H25 H73
    Date: 2013
  22. By: Du Rietz, Gunnar (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: This paper studies the evolution of modern Swedish wealth taxation since its introduction in 1911 until it was abolished in 2007. It offers a thorough description of the rules concerning valuation of assets, deductions/exemptions and tax schedules to characterize effective wealth tax schedules for the period 1911–2006. These rules and schedules are used to calculate marginal and average wealth tax rates for the whole period for a number of differently endowed owners of family firms and individual fortunes. The overall trend in the direct wealth tax was rising until 1971 for owners of large and middle-sized firms and for individuals of similar wealth consisting of non-corporate assets. Average direct wealth tax rates were low until 1934, except for 1913 when a temporary extra progressive defense tax was levied. There were three major tax hikes: in 1934, when the wealth tax was more than doubled, in 1948 when tax rates doubled again and in 1971 for owners of large firms and similarly sized non-corporate fortunes. Effective tax rates peaked in 1973 for owners of large firms and in 1983 for individuals with large non-corporate wealth. Reduction rules limited the wealth tax rates from 1934 for fortunes with high wealth/income ratios. The wealth tax on unlisted net business equity was abolished in 1991. Tax rates for wealthy individuals were decreased in 1991 and in 1992 and then remained at 0.51 percent until 2006, depending on whether the reduction rule was applicable. Tax rates for small-firm owners and small individual fortunes were substantially lower, but the tax difference was much smaller when owners of large fortunes could benefit from the reduction rules. The effective wealth tax was much greater if firm owners had to finance wealth tax payments through additional dividend payouts. In such cases the effective total wealth taxes were affected by high marginal income tax rates and peaked at extremely high levels in the 1970s and 1980s. Towards the end of the wealth tax regime, aggregate wealth tax revenues were relatively small: it never exceeded 0.4 percent of GDP in the postwar period and amounted to 0.16 percent of GDP in 2006.
    Keywords: Wealth tax; Tax avoidance; Entrepreneurship
    JEL: D31 H20 K34
    Date: 2014–01–02
  23. By: Nora Lustig (Tulane University and Center for Global Development and Inter-American Dialogue.); Florencia Amábile (Affilitation available at; Marisa Bucheli (Affilitation available at; George Gray Molina (Affilitation available at; Sean Higgins (Affilitation available at; Miguel Jaramillo (Affilitation available at; Wilson Jiménez Pozo (Affilitation available at; Veronica Paz Arauco (Affilitation available at; Claudiney Pereira (Affilitation available at; Carola Pessino (Affilitation available at; Máximo Rossi (Affilitation available at; John Scott (Affilitation available at; Ernesto Yáñez Aguilar (Affilitation available at
    Abstract: How much redistribution and poverty reduction is being accomplished in Latin America through social spending, subsidies, and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay using a comparable methodology yields the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay but less so in Bolivia, Mexico, and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are generally low. Cash transfers are quite progressive in absolute terms, except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes more than offset the poverty-reducing impact of cash transfers. When one includes the in-kind transfers in education and health, valued at government costs, they reduce inequality in all countries by considerably more than cash transfers, reflecting their relative size.
    Keywords: fiscal incidence, inequality, poverty, taxes, social spending, Latin America.
    JEL: H22 I3 O1
    Date: 2013–11
  24. By: Shun-ichiro Bessho (Faculty of Economics, Keio University,); Masayoshi Hayashi (Faculty of Economics, The University of Tokyo)
    Abstract:    This study explores the effects of the spousal allowances in the Japanese system of personal income taxes, taking advantage of the micro-simulation method based on the discrete choice model of labor supply. Our simulations show that the complete abolishment of the spousal allowances would increase the female labor supply by 1.6% for all wives, and by .1% for wives that are supposed to be under a large influence of the allowances. We also examine the reform in the allowances which leads to a decrease in the female labor supply. We argue that these results are due to our explicit consideration of the fixed cost of labor market participations, which has been ignored in the previous Japanese studies.
    Date: 2013–12

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