nep-pub New Economics Papers
on Public Finance
Issue of 2014‒03‒30
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Itemised deductions: a device to reduce tax evasion By Amedeo Piolatto
  2. Taxing hard-to-tax markets By Arbex, Marcelo; Mattos, Enlinson; Ogura, Laudo M.
  3. The taxation of nonrenewable natural resources By GAUDET, Gérard; LASSERRE, Pierre
  4. Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program By Mark Duggan; Amanda Starc; Boris Vabson
  5. M&A and the tax benefits of debt-financing By Scheuering, Uwe
  6. British Tax Credit Simplification, the Intra- household Distribution of Income and Family Consumption By Fisher, Paul
  7. A fiscal revolution? Progressivity in the Spanish tax system, 1960-1990 By Sara Torregrosa Hetland
  8. How Would the Design of an Alternative Minimum Tax Impact the Effective Corporate Tax Rate in Belgium By Vincent Daxbek; Antonio Estache
  9. Should I Stay or Should I Go? Public Provision of a Private Good with an Exit Option By Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron

  1. By: Amedeo Piolatto (Universitat de Barcelona & IEB)
    Abstract: With direct incentives and sanctions being the most common instruments to fight tax evasion, the theoretical literature has tended to overlook indirect schemes, such as itemised deductions, in which one agent has an interest in other agents declaring their revenue. Itemised deductions provide an incentive for consumers to declare their purchases, and this forces sellers to do the same. I show that it is possible to increase tax proceeds by choosing a suitable level of itemised deduction, and this, for any level of taxation. Indeed, the cost for the government on the consumers' side is more than compensated for by the extra proceeds generated on the sellers' side.
    Keywords: Tax evasion, itemised deductions, substitute goods, duopoly
    JEL: H00 H20 H26 H30
    Date: 2014
  2. By: Arbex, Marcelo; Mattos, Enlinson; Ogura, Laudo M.
    Abstract: Tax enforcement costs constrain the government s ability to observe economic transac-tions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxedand consumers are better o¤ than in taxed markets. This paper studies a novel approachto combat evasion in HTT markets: consumer auditing, which rewards consumers for re-questing transaction receipts. We develop a Hotelling-type spatial model of sales taxationto analyze the welfare and distributional e¤ects of the implementation of this policy. We nd that consumer auditing allows for a lower tax rate and greater provision of the publicgood in the economy. We show that this policy not only can enhance welfare, but alsoequalize utilities of consumers across markets
    Date: 2014–02–12
  3. By: GAUDET, Gérard; LASSERRE, Pierre
    Abstract: We provide an analytical overview of the distortionary effects of some common forms of taxes faced by the nonrenewable resources sector of the economy. In the category of taxes meant specifically to capture the resource rent, we look at a specific severance tax, an ad valorem severance tax, a profit tax and a ‘lump-sum’ tax, with emphasis on their effects on the extraction decisions over time and on the initial reserves to be developed. In the category of taxes meant for all sectors of the economy, we look at the corporate income tax and its special provision for the resource sector in the form of a depletion allowance, with emphasis on the effects on the intra-industry resource extraction decisions and on the inter-industry allocation of investment.
    Keywords: Nonrenewable resources; taxation; neutrality; distortion; resource rent; capital allocation
    JEL: Q31 Q38 H21
    Date: 2013
  4. By: Mark Duggan; Amanda Starc; Boris Vabson
    Abstract: Governments contract with private firms to provide a wide range of services. While a large body of previous work has estimated the effects of that contracting, surprisingly little has investigated how those effects vary with the generosity of the contract. In this paper we examine this issue in the Medicare Advantage (MA) program, through which the federal government contracts with private insurers to coordinate and finance health care for more than 15 million Medicare recipients. To do this, we exploit a substantial policy-induced increase in MA reimbursement in metropolitan areas with a population of 250 thousand or more relative to MSAs just below this threshold. Our results demonstrate that the additional reimbursement leads more private firms to enter this market and to an increase in the share of Medicare recipients enrolled in MA plans. Our findings also reveal that only about one-fifth of the additional reimbursement is passed through to consumers in the form of better coverage. A somewhat larger share accrues to private insurers in the form of higher profits and we find suggestive evidence of a large impact on advertising expenditures. Our results have implications for a key feature of the Affordable Care Act that will reduce reimbursement to MA plans by $156 billion from 2013 to 2022.
    JEL: H22 I13 L1
    Date: 2014–03
  5. By: Scheuering, Uwe
    Abstract: The deductibility of interest expenses from the corporate tax base creates an incentive for acquiring companies to finance a takeover with debt. In this paper, I investigate the impact of profit taxation on the financing decision in corporate acquisitions for the first time for a sample of different acquirer-countries mainly in Europe. The likelihood to observe a debt-financed acquisition is found to increase in the acquirer's tax rate. In addition, I take into account that the financing decisions of particular acquisitions might not be independent from other investment decisions. Therefore, I analyze the acquirer's capital structure development around the acquisition and find an increase in the statutory tax rate by one %-point to be associated with a stronger increase in the debt ratio by 0.55 %-points during the acquisition period. --
    Keywords: M&A,Business Taxation,Capital Structure,Empirical Analysis
    JEL: G34 H25 H32
    Date: 2014
  6. By: Fisher, Paul
    Abstract: The UK Government enacted simplification of its tax credit system in 2003. An inter- esting consequence of the reform is that tax credit payments were split between partners in couples, causing a rare wallet to purse transfer. This paper presents evidence on the effects of the reform on family spending, using quasi-likelihood techniques, for a sample of low income couples with children. In areas of child goods, evidence of important spending increases are found, whereas spending decreases are observed amongst goods that disproportionately ben- efit parents. A further key finding is an apparent trade-off between spending on public goods that are not exclusively consumed by children, but may nonetheless have a child development dimension. Results are contrasted to earlier findings from UK 1970s child benefit reforms. The effects are consistent with a non-cooperative bargaining framework, in which partners differ in their relative preference for different household public goods.
    Date: 2014–03–13
  7. By: Sara Torregrosa Hetland (Universitat de Barcelona)
    Abstract: The main objective of this paper is to calculate the distribution of the tax burden across income levels in Spain between 1960 and 1990. The chosen period covers the final years of Franco’s dictatorship and the first ones of the present parliamentary regime, and is thus meant to explore how political change was reflected on taxation. Does transition entail a fiscal revolution? Here is one case study developed and compared to other national experiences. Effective tax reform seems to have been politically blocked during the dictatorship, with public budgets growing fundamentally on the grounds of social security contributions. Democracy brought about a comprehensive transformation starting in 1977, which aimed at improving fairness (progressivity) and increasing revenue (to fund the development of the Welfare State). In this work I analyse whether the reforms entailed effective changes in the distribution of the tax burden, by imputing tax collection to taxpayers, based on income and consumption micro-data from Household Budget Surveys. The results show a persistent (albeit decreasing) regressivity in the tax system, which caused an increasingly negative redistribution of income. Pre-Tax incomes grew unequal during the period and net incomes even more so as a result: the tax reform did not fulfill its equalizing promises. The joint effect of the fiscal system, however, seems to have been slightly positive due to progressive social spending.
    Keywords: Tax system, progressivity, redistribution, income inequality
    JEL: D31 N34 N44 H23
    Date: 2014
  8. By: Vincent Daxbek; Antonio Estache
    Date: 2013–05
  9. By: Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron
    Abstract: In this paper, we adapt the standard political economy models of mixed financing of private goods to allow for an exit option in which individuals can choose to neither consume nor finance the publicly provided private good. Using a controlled laboratory experiment, we empirically investigate the predictions of this model when all individuals are allow to exit (universal-exit) and when only individuals with an income at or above a threshold income level are allowed to exit (conditional-exit). Even though the incentives for high-income individuals to exit are identical under both exit schemes, high-income individuals are less likely to exit when the exit option is universal. Sensitivity treatments suggests that a number of factors may be at play in explaining this result, including learning effects and a type of endowment effect, but that other-regarding preferences do not appear to be an important factor.
    Keywords: publicly provided private good, mixed financing, voting experiment
    JEL: H42 H44 C91 D7
    Date: 2014–03

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