nep-pub New Economics Papers
on Public Finance
Issue of 2015‒04‒11
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal taxation theory and principles of fairness By Fleurbaey, Marc; Maniquet, François
  2. Personal Income Tax Reforms: a Genetic Algorithm Approach By Matteo Morini; Simone Pellegrino
  3. On the timing of tax and investment in fiscal competition models By Hindriks, Jean; Nishimura, Yukihiro
  4. Tax and Transfer Policies and the Female Labor Supply in the EU By Kaliskova, Klara
  5. Improving Taxes and Transfers in Australia By Philip Hemmings; Annamaria Tuske
  6. Income tax exemption as a regional state aid in special economic zones and its impact upon development of Polish districts By Adam A. Ambroziak

  1. By: Fleurbaey, Marc (Princeton University); Maniquet, François (Université catholique de Louvain, CORE, Belgium)
    Abstract: The achievements and limitations of the classical theory of optimal labor-income taxation based on social welfare functions are now well known, although utilitarianism still dominates public economics. We review the recent interest that has arisen for broadening the normative approach and making room for fairness principles such as desert or responsibility. Fairness principles sometimes provide immediate recommendations about the relative weights to assign to various income ranges, but in general require a careful choice of utility representations embodying the relevant interpersonal comparisons. The main message of this paper is that the traditional tool of welfare economics, the social welfare function framework, is flexible enough to incorporate many approaches, from egalitarianism to libertarianism.
    Keywords: optimal taxation, fair social orderings
    JEL: H21 D63
    Date: 2015–02–19
  2. By: Matteo Morini (ENS Lyon and University of Torino); Simone Pellegrino (University of Torino)
    Abstract: Given a settled reduction in the present level of tax revenue, and by exploring a very large combinatorial space of tax structures, in this paper we employ a genetic algorithm in order to determine the ‘best’ structure of a real world personal income tax that allows for the maximization of the redistributive effect of the tax, while preventing all taxpayers being worse off than with the present tax structure. We take Italy as a case study.
    Date: 2014–12
  3. By: Hindriks, Jean (Université catholique de Louvain, CORE, Belgium); Nishimura, Yukihiro (Osaka University, Graduate School of Economics, Japan)
    Abstract: We study a model in which asymmetric regions compete for capital with both public investments and taxes. Public investments are chosen in the first stage, and then source income taxes are set in the second stage. Public investments increase the productivity of capital and they also serve to stake out a positive advantage in the tax competition stage. In standard theories of tax competition, investments and taxes were assumed to be chosen simultaneously. Comparing our approach to earlier theory, we show that regions prefer to choose investment before taxes. We also show that sequential choice of taxes is preferable to simultaneous choice of taxes, and that modulo sufficient asymmetry among regions, the simultaneous choice of investment is preferable to the sequential choice of investments. Our theoretical prediction is that both taxes and public investments are distorted downwards in equilibrium.
    Keywords: endogeneous timing, tax competition, public investments
    JEL: H30 H87 C72
    Date: 2014–12–15
  4. By: Kaliskova, Klara (CERGE-EI)
    Abstract: This study contributes to the female labor supply responsiveness literature by measuring the effect of tax-benefit policies on female labor supply based on a broad sample of 26 European countries in 2005-2010. The tax-benefit microsimulation model EUROMOD is used to calculate a measure of work incentives at the extensive margin – the participation tax rate, which is then used as the main explanatory variable in a female employment equation. This allows me to deal with the endogeneity of income in a new way by using a simulated instrumental variable based on a fixed EU-wide sample of women. Results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2 percentage points. The effect is higher for single mothers, for women in the middle of the skills distribution, and in countries that have lower rates of female employment.
    Keywords: female labor supply, tax and benefit system, Europe, instrumental variable
    JEL: C25 H24 H31 J22
    Date: 2015–03
  5. By: Philip Hemmings; Annamaria Tuske
    Abstract: Getting tax and transfer systems to efficiently deliver sufficient revenues to achieve macroeconomic targets, address goals in re-distribution and social welfare, encourage employment, accommodate business-competitiveness concerns and incorporate environmental issues is difficult. In Australia, slowing economic growth in the wake of the mining boom has sharpened the trade-offs and brought into focus the importance of encouraging broad-based advances in employment and productive capacity while also dealing with other long-term challenges, in particular population ageing and greenhouse-gas emission reduction. This review particularly recommends shifting away from income taxation to indirect taxation, for instance by raising more revenue from the Goods and Services Tax. The report also advises caution in some recent welfare-reform proposals, and advocates broad support for business rather than targeted subsidies and other forms of corporate welfare. As regards environmental policies, the report comments on the proposed Emission Reduction Fund for reducing greenhouse gases and supports reform to vehicle-related taxation. This Working Paper relates to the 2014 OECD Economic Survey of Australia (<P>Améliorer le système de prélèvements et de prestations en Australie<BR>Il n’est pas facile de faire en sorte que le système de prélèvements et de prestations dégage suffisamment de recettes pour atteindre les objectifs de politique macroéconomique, de redistribution et de bien-être social, encourage la création d’emplois, réponde aux préoccupations de compétitivité des entreprises et contribue à relever les défis environnementaux. En Australie, le ralentissement de la croissance économique à la suite du boom minier a accentué les arbitrages et mis en lumière l’importance d’encourager de larges progrès en matière d’emploi et de capacités productives, tout en relevant d’autres défis à long terme, comme le vieillissement démographique et la réduction des émissions de gaz à effet de serre. Cet examen recommande en particulier de se détourner de l’imposition des revenus au profit de la fiscalité indirecte, par exemple en augmentant les recettes provenant de la taxe sur les produits et services. Le rapport met également en garde concernant certaines propositions récentes de réforme du système de protection sociale, et préconise un large soutien aux entreprises plutôt que des subventions ciblées et d’autres formes d’aide sociale aux entreprises. S’agissant des politiques d’environnement, le rapport formule des observations sur le projet de Fonds pour la réduction des émissions de gaz à effet de serre et appuie la réforme de la taxation des véhicules. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l'Australie, 2014 ( ue-australie.htm.).
    Keywords: taxes, transfers, taxation, subsidies, income tax, pensions, corporate tax, welfare, carbon tax, indirect tax, goods and services tax, biens et services, impôt indirect, taxe carbone, impôt sur les sociétés, aide sociale, subventions, impôt sur le revenu, fiscalité, transferts, pensions
    JEL: H20 H21 H22 H23 H24 H25 H26 H27 H29 Q58
    Date: 2015–03–27
  6. By: Adam A. Ambroziak (Warsaw School of Economics)
    Abstract: Special Economic Zones (SEZs) were established to attract entrepreneurs to invest in Polish regions in order to increase their social and economic development. One of the most important incentives offered in SEZs is state aid in the form of an income tax exemption. The objective of this paper is to verify if the intensity of regional state aid granted to entrepreneurs in SEZs has had a positive impact on the social and economic development of Polish poviats (a poviat is an administrative district). The public aid was received by beneficiaries when they made some profits and, instead of investing, used a tax allowance to decrease their tax base. However, part of the positive outcome of economic activities envisioned in SEZs should be the development of existing businesses and the emergence of start-ups, as well as the improved attractiveness of the region and the inflow of new investors (which should be manifested by an increase in the gross value of fixed assets per entrepreneur and a decrease in the unemployment rate at poviat level). The conducted research allowed for the conclusion that regional state aid in SEZs in the form of an income tax exemption was of a relative higher importance to the poorest regions (higher share in the amount of regional state aid), while its significance was much lower in better developed areas in Poland (lower share in the amount of regional state aid). The year-to-year study showed no relation between state aid granted in SEZs and an increase in GVFA per company or a decrease in the unemployment rate. However on the basis of analysis of the cumulated value of state aid in SEZs for the whole period from 2005 to 2013, we can say that regional state aid in the form of an income tax exemption in SEZs had a positive influence mainly in poviats located in the poorest voivodeships.
    Keywords: regional state aid; special economic zones; regional development; poviats in Poland; public support
    JEL: H25 H32 R11 R58
    Date: 2015–04

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