nep-pub New Economics Papers
on Public Finance
Issue of 2015‒03‒22
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxation and the User Cost of Capital: An Introduction By John Creedy; Norman Gemmell
  2. Tax Aversion, Laffer Curve, and the Self-financing of Tax Cuts By Soldatos, Gerasimos T.
  3. Taxes on risky returns — an update By Wolfgang Buchholz; Kai A. Konrad
  4. Local neutrality of Corporate Tax systems By Pablo Gutierrez; Ramon E. Lopez; Eugenio Figueroa
  5. Taxation and the International Mobility of Inventors By Ufuk Akcigit; Salomé Baslandze; Stefanie Stantcheva
  6. Do Taxes Crowd Out Intrinsic Motivation? Field-Experimental Evidence from Germany By Pierre C. Boyer; Nadja Dwenger; Johannes Rincke
  7. Moving Beyond the Flat Tax - Tax Policy Reform in the Slovak Republic By Ján Remeta; Sarah Perret; Martin Jareš; Bert Brys

  1. By: John Creedy; Norman Gemmell (The Treasury)
    Abstract: The aim of this paper is to provide an introduction to the concept of user cost and its determinants. Particular attention is given to the influence of taxation. The concept of user cost relates to the rental, the rate of return to capital, that arises in a profit maximising situation in which further investment in capital produces no additional profit. This paper sets out in some detail the range of assumptions involved in obtaining alternative expressions for the user cost. The user cost refers to a before-tax capital rental, the rate of return that ensures that the (after-tax) cost of capital is equal to the post-tax returns over its life. Hence, associated with the user cost measure is an effective marginal tax rate. This can differ substantially from the statutory marginal rate applicable to the investor. A related effective average tax rate is also defined.
    Date: 2015–03
  2. By: Soldatos, Gerasimos T.
    Abstract: High taxation is found to lead not to less labor supply but to more tax evasion and/or black labor. Investigating next what this implies for the course of the tax revenue and subsequently for the shape of the Laffer curve, this curve is found to change with the tax induced change of taxpayer preferences over tax compliance and tax aversion. Hence, the relevant Laffer curve when contemplating tax cuts should be the one after the last tax increase and cannot thereby be fully self-financed.
    Keywords: Laffer curve, Tax evasion/black labor, Self-financing tax cuts
    JEL: E62 H26 J22
    Date: 2015–05
  3. By: Wolfgang Buchholz; Kai A. Konrad
    Abstract: This paper surveys the theory on taxes on risky returns that originated from Domar and Musgrave (1944). Emphasis is given to the role of complete capital markets and on capital market imperfections arising from limited liability, moral hazard and adverse selection.
    Keywords: risk taking, taxation, capital markets
    JEL: H22 H25
    Date: 2014–07
  4. By: Pablo Gutierrez; Ramon E. Lopez; Eugenio Figueroa
    Abstract: This paper shows one important result, namely, that corporate tax systems that allow at least for two sources of investment tax deductions (e.g., accelerated arbitrary investment depreciation and deductibility of part of interest payments on the firm`s debt) can be, under certain plausible conditions, locally neutral. That is, they allow for the existence of at least one positive corporate tax rate that renders the user cost of capital equal to the undistorted (without taxes) level of this cost.
    Date: 2014–10
  5. By: Ufuk Akcigit; Salomé Baslandze; Stefanie Stantcheva
    Abstract: This paper studies the effect of top tax rates on inventors' mobility since 1977. We put special emphasis on "superstar" inventors, those with the most and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors' locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors' counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. We find that superstar top 1% inventors are significantly affected by top tax rates when deciding where to locate. The elasticity of the number of domestic inventors to the net-of-tax rate is relatively small, between 0.04 and 0.06, while the elasticity of the number of foreign inventors is much larger, around 1.3. The elasticities to top net-of-tax rates decline as one moves down the quality distribution of inventors. Inventors who work in multinational companies are more likely to take advantage of tax differentials. On the other hand, if the company of an inventor has a higher share of its research activity in a given country, the inventor is less sensitive to the tax rate in that country.
    JEL: F22 H21 H24 H31 J61 O33 O38
    Date: 2015–03
  6. By: Pierre C. Boyer; Nadja Dwenger; Johannes Rincke
    Abstract: This paper studies how imposing norms on contribution behavior affects individuals' intrinsic motivation. We consider an urban area in Germany where the Catholic Church collects a local church levy as a charitable donation, despite the fact that the levy is legally a tax. In cooperation with the church, we design a natural randomized field experiment with letter treatments informing individuals that the church levy is in fact a tax. Guided by a simple theoretical model, we use baseline contribution behavior to measure individuals' intrinsic motivation and demonstrate that treatment effects differ strongly across motivational types. Among weakly intrinsically motivated individuals, communicating the existence of a legal norm results in a significant crowd-out of intrinsic motivation. In contrast, strongly intrinsically motivated individuals do not show any treatment response. We cross-validate our findings using alternative motivational measures derived from an extensive post-treatment survey.
    Keywords: intrinsic motivation, crowding out, charitable giving, taxes, public goods, natural randomized field experiment
    JEL: C93 D03 H26 H41
    Date: 2014–12
  7. By: Ján Remeta; Sarah Perret; Martin Jareš; Bert Brys
    Abstract: The Slovak Republic was among the fastest growing OECD economies in the last decade. It is broadly recognised that the 2004 tax reform contributed to this success. Ten years after this fundamental reform, however, the time has come to re-evaluate some of the key characteristics of the Slovak tax system. The Slovak economy faces multiple challenges including an ageing population, a persistently high unemployment rate, significant regional disparities, skills gaps and risks related to the increasing international competition for mobile capital. Can the Slovak tax system in its present form prevail against these headwinds? The paper shows that the current tax system suffers from weaknesses that constrain its capacity to raise additional revenues and to create the conditions for inclusive and sustainable economic growth. Although measures have recently been introduced to address some of these challenges, additional tax reforms and a further strengthening of the tax administration will be needed. The OECD worked jointly with the Institute for Financial Policy (IFP) of the Slovak Ministry of Finance to provide an overall assessment of the Slovak tax system and recommendations for future tax policy reforms.
    Keywords: tax reform, Slovak Republic, tax policy
    JEL: H2
    Date: 2015–03–12

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