nep-pub New Economics Papers
on Public Finance
Issue of 2014‒07‒28
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Small Business, Innovation, and Tax Policy: A Review By Gale, William; Brown, Samuel
  2. Redistributive Effects of Income Tax Rates and Tax Base 1984-2009: Evidence from Japanese Tax Reforms By Miyazaki, Takeshi; Kitamura, Yukinobu
  3. A Negotiation-Based Model of Tax-Induced Transfer Pricing By Johannes Becker; Ronald B. Davies
  4. Public input competition under Stackelberg equilibrium: A note. By Yongzheng Liu; Jorge Martinez-Vazquez
  5. A Tax Revenue Dataset for Sub-Saharan Africa: 1980-2010 By Mario MANSOUR
  6. Central Targets and local Agendas: Missing Lisbon 2010 By Maria Alessandra Antonelli; Veronica Grembi

  1. By: Gale, William; Brown, Samuel
    Abstract: Small businesses occupy an iconic place in American public policy debates. This paper discusses interactions between the federal tax code, small business, and the economy. We summarize the characteristics of small businesses, identify the tax provisions that most affect small businesses, and review evidence on the impact of tax and other policies on entrepreneurial activity. We also examine evidence suggesting that it is young firms, not small ones, where job growth and innovation tend to occur. Policies that aim to stimulate young and innovative firms are likely to prove different than policies that subsidize small businesses.
    Keywords: entrepreneurship, tax policy, innovation, small business
    JEL: H2
    Date: 2013–04–08
  2. By: Miyazaki, Takeshi; Kitamura, Yukinobu
    Abstract: The primary objective of this paper is to examine how and to what extent changes in income tax rates and income tax deductions affect income inequality from longitudinal perspectives, by using microdata from Japanese individuals and households. The findings of this paper could shed light on the effects of tax rates and tax deduction on tax progressivity. First, redistributive effects of the Japanese income tax are likely to decline for the period 1984-2009. Second, the income tax reforms, i.e., reduction in tax rates and increase in tax base, give rise to greater redistributive effects of income tax rates and lower redistributive effects of tax base. Third, progressivity measures show the same trends with respect to the redistributive effects of tax changes on pretax income over the period.
    Keywords: Income taxation, redistribution, tax deduction, tax rates
    JEL: D3 H2 H24
    Date: 2014–06
  3. By: Johannes Becker (University of M{\"u}nster); Ronald B. Davies (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo)
    Abstract: We present a new model of tax induced transfer pricing as an alternative to the oft-used concealment model. Inspired by interviews with practitioners, we consider a large multinational firm which is audited by the tax authority in the high-tax location. When this country adjusts the transfer prices proposed by the firm, the low-tax location may dispute this decision and initiate negotiations. Since negotiations are costly, the high-tax location sets a transfer price that prevents the low-tax location from entering negotiations. We compare this model's predictions to those of the concealment model. The negotiation model replicates the predictions on the tax rate effects on transfer pricing, while adding new predictions. Profit shifting is expected to fall in the high-tax country's bargaining power and to rise in firm profits and domestic firm ownership in both countries. Most importantly, profit shifting occurs even if tax enforcement is perfect. We analyze the effects of an introduction of a common consolidated corporate tax base with formula apportionment and conclude that the negotiation model may change the perspective on such a policy. Specifically, strong countries with large bargaining power may find this reform unappealing.
    Keywords: transfer pricing, Nash bargaining, tax avoidance, corporate taxation
    JEL: H25 H32 H87
    Date: 2014–07
  4. By: Yongzheng Liu; Jorge Martinez-Vazquez
    Abstract: This paper examines the Stackelberg equilibrium for public input competition and compares it with the non-cooperative Nash equilibrium. Given two asymmetric regions, we show that under the Nash equilibrium, the more productive region tends to spend more on public input, which results in this region attracting more capital than the less productive region. The comparison of the two equilibria reveals that the leader region obtains a _rst-mover advantage under the stackelberg setting. This suggests that if regions interact with each other sequentially as in the Stackelberg equilibrium, then the regional disparity that is due to the heterogeneity of productivity is likely to be mitigated or enlarged, depending on which region performs the leadership role in the competition process.
    Keywords: Public input competition, Nash and Stackelberg equilibria, Comparison.
    JEL: H73 H87 C72
    Date: 2014–07
  5. By: Mario MANSOUR (Fiscal Affairs Department - International Monetary Fund)
    Abstract: This paper presents a unique tax revenue dataset for Sub-Saharan Africa, which main innovation is the level of detail it provides about tax revenue sources for a large number of countries (41) and over a long time period (1980-2010). The paper describes how the dataset was constructed, identifying along the way problem areas in tax revenue statistics in Sub-Saharan Africa and possible improvements. A graphical analysis highlights revenue performance over time and across three dimensions: income levels, the relative importance of tax revenue from extractive industries, and trading groups (free-trade areas and customs unions). The dataset, available at, should be useful to a wide range of users and researchers, including academics, tax policy practitioners and advisers, and revenue and customs administrations.
    JEL: H20 O10
    Date: 2014–07
  6. By: Maria Alessandra Antonelli (Sapienza University of Rome); Veronica Grembi (Copenhagen Business School)
    Abstract: In a decentralized setting, are policy targets imposed by the central government on local elected officials effective? And when? We address these questions in Italy, where the central government has set a target for childcare coverage at the municipal level for Southern regions since 2007. We first implement a difference-in-differences estimator where the municipalities already complying with the target comprise the control group. We then implement a triple-difference estimator with the additional control group of municipalities in the bordering Central regions. Our results show that elected officials comply with the target mainly when it is coherent with voters’ preferences (as measured by the characteristics of the resident female population) and in reaction to political incentives (as measured by partisan alignment among levels of government).
    Keywords: Central targets, Political Incentives, Local Politicians, Difference-in- Difference-in-Difference
    JEL: H42 H72 H75 H77
    Date: 2014–07

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