nep-pub New Economics Papers
on Public Finance
Issue of 2015‒01‒14
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On the Relative Size of Direct and Indirect Taxation By Soldatos, Gerasimos T.
  2. An Empirical Analysis of the Property Tax Appeals Process By Doerner, William; Ihlanfeldt, Keith
  3. Tax planning of R&D intensive multinationals By Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
  4. Knocking on Tax Haven’s Door: Multinational Firms and Transfer Pricing By Ronald B Davies; Julien Martin; Mathieu Parenti; Farid Touba
  5. Beyond the acronyms: local property taxation in Italy By Giovanna Messina; Marco Savegnago
  6. Tax incentives and firm size : effects on private R&D investment in Spain By Labeaga Azcona J.; Martínez-Ros E.; Mohnen P.

  1. By: Soldatos, Gerasimos T.
    Abstract: Modifying the standard analytical apparatuses for direct and indirect tax evasion to incorporate forward indirect tax shift in a monopolistically competitive environment, this paper maintains that indirect tax evasion would exceed for sure direct tax evasion only under consumer risk neutrality and a tax policy zeroing the tax shift. Also, in the presence of tax evasion, there cannot be optimal direct-indirect tax mix, because tax evasion is accompanied by uncertainty and hence, nonlinearities in the tax schedules that cannot be dealt with at least practically.
    Keywords: Direct and indirect tax evasion, Forward indirect tax shift, Consumer risk neutrality
    JEL: H22 H24 H25 H26
    Date: 2014
  2. By: Doerner, William; Ihlanfeldt, Keith
    Abstract: Property tax appeals have increased dramatically at significant cost to local governments. Little is known about whether or how well the appeals process resolves potential assessment errors. This paper investigates the efficiency and equity of this process. Regarding the efficiency of correcting assessment error, reductions are granted for a majority of appealing homeowners who are overassessed but also for homeowners who are not overassessed, leaving them underassessed or further underassessed. Regarding the fairness of the appeals process, homeowners from particular neighborhoods receive assessment reductions more often. Tax representatives play an important role in explaining the advantage enjoyed by these homeowners.
    Keywords: appeal; property tax; assessment error
    JEL: D70 H20 P48 R30
    Date: 2014
  3. By: Heckemeyer, Jost H.; Richter, Katharina; Spengel, Christoph
    Abstract: The allocation of management and control in the business decision process finds expression in the coordination intensity between agents in the firm. We develop and test a theory, based on the organizational design literature, for the intensity in which the tax department strives to coordinate with managers from other business units in order to intervene in investment decisions. Our theoretical considerations predict that R&D intensity is an important determinant of the tax department's role. Using data from a confidential survey taken in 2012 of top financial and tax managers of very large multinational companies, representing 8% of business R&D spending in the OECD, we indeed find supporting evidence that in R&D intensive multinational firms the tax department operates more as a controller than as a manager. In particular, tax departments of R&D intensive firms make less tax planning effort, are less ambitious to minimize the tax burden of the firm, are later involved in the decision-making process of a new investment project, but are more likely to have a veto right in the decision on a new investment project as compared to less R&D intensive firms. Conditional on R&D intensity, however, the level of intangible assets in the firm is associated with more tax planning efforts and ambitions. Our results are statistically significant and robust towards several sensitivity checks.
    Keywords: corporate taxation,organizational design,survey data
    JEL: H25 L22 M41
    Date: 2014
  4. By: Ronald B Davies (University College Dublin); Julien Martin (Université du Québec à Montréal); Mathieu Parenti (Université Catholique de Louvain); Farid Touba (Ecole Normale Supérieure de Cachan)
    Abstract: This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm’s length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the risk to be sanctioned is high compared to the tax gap. Using detailed French firm-level data on arm’s length and intra-firm export prices, we find that both mechanisms are at work. The sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find almost no evidence of tax avoidance if we disregard exports to tax havens. Back-of-the-envelope calculations suggest that tax avoidance through transfer pricing amounts to about 1% of the total corporate taxes collected by tax authorities in France. The lion’s share of this loss is driven by the exports of 450 firms to ten tax havens. As such, it may be possible to achieve significant revenue increases with minimal cost by targeting enforcement.
    Keywords: Transfer pricing; Tax haven; Pricing to market
    JEL: F23 H25 H25 H32
    Date: 2014–12–22
  5. By: Giovanna Messina (Bank of Italy); Marco Savegnago (Bank of Italy)
    Abstract: The paper traces recent developments in local real estate taxation in Italy. We exploit a rich dataset at both aggregate and individual level to estimate the variation in local taxes on first homes in the last three years and the redistributive impact of the adoption of the tax on indivisible services in 2014. Local property taxes on first homes average one fifth lower in 2014 than in 2012; including waste disposal taxes, the overall local fiscal burden remains broadly stable. However, taxation bears more heavily on lower-income households, owing to decreased allowance for tax deductions. To conclude, the paper examines possible future local property tax reform measures (keeping total revenue constant) to enhance transparency and equity.
    Keywords: property taxes, local taxes, redistribution
    JEL: H71 H23
    Date: 2014–11
  6. By: Labeaga Azcona J.; Martínez-Ros E.; Mohnen P. (UNU-MERIT)
    Abstract: The use of fiscal policy instruments to stimulate private RD is widespread and important in some countries like Spain. In this paper we explore the effectiveness of RD tax incentives on knowledge capital accumulation in Spanish manufacturing firms using an unbalanced panel and compare the estimates based on claimed and claimable tax reductions. We find that while large firms use the programme more than small ones, the impact of the programme measured by the price elasticity is smaller for large firms than for SMEs. The price elasticities are higher when the ex-ante claimable tax reductions rather than the ex-post actually claimed tax eductions are used to compute the user cost of RD.
    Keywords: Business Taxes and Subsidies including sales and value-added (VAT); Fiscal Policies and Behavior of Economic Agents: Firm; Management of Technological Innovation and R&D;
    JEL: H25 H32 O32
    Date: 2014
  7. By: Ivan Raoniæ, Zoran Vasic (College of Economics and Administration, Belgrade; Republic of Serbia, Ministry of Finance, Tax Administration.)
    Abstract: Like any tax, the VAT is vulnerable to evasion and fraud. It should be said that its concept of credit - refund offers the unique possibility of abuse, which has for a long time the main concern in the European Union (EU), while in Serbia profiled specific form of VAT evasion, so called “ Business with phantom companies “. This paper describes the basic types of tax violations characteristic of VAT, considers how to solve them, based on the experiences of development countries, with a special focus on the specific concept to VAT in Serbia.
    Keywords: enterprise, allocation, realokatori, yield, expenses, recession, capital.
    JEL: H20 H25 H26
    Date: 2014–09

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