nep-pub New Economics Papers
on Public Finance
Issue of 2015‒05‒02
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax salience: an experimental investigation By Morone, Andrea; Nemore, Francesco
  2. Reforming the Tax on Immovable Property: Taking Care of the Unloved By Hansjörg Blöchliger
  3. Measuring the Tax effort of Developed and Developing Countries. Cross Country – Panel Data Analysis – 1985/95 By Marcelo Piancastelli
  4. A bird’s eye view on 20 years of tax-benefit reforms in Belgium By André Decoster; Serio Perelman; Dieter Vandelannoote; Toon Vanheukelom; Gerlinde Verbist
  5. Basic Issues in Reforming Social Security Systems By Francisco Eduardo Barreto de Oliveira

  1. By: Morone, Andrea; Nemore, Francesco
    Abstract: A basic principle in public finance is tax incidence equivalence (well known as Liability Side Equivalence Principle, LES). This principle holds that the burden of a unit tax on buyers and sellers is independent of who actually pays the tax. Moreover, economic theory assumes an individual behaviour model in which subjects act as if they have to fully optimize changes in tax policies by correctly processing information in their possession. However, a wide empirical literature focused on some psychological issues that have as yet not been considered theoretically. It is easy to assume that the introduction of tax-inclusive prices and tax-exclusive prices could lead to price misperception. This means that individuals could not perceive the exact burden of a tax when it is not salient (as it could be in the case of tax-exclusive prices). We conduct a laboratory experiment that attempts to answer two relevant questions: (1) Do subjects’ behaviour change with a less salient tax? (2) Is tax incidence independent of the responsibility to pay a more or less salient tax? Based on the results of Mann-Whitney U tests, concerning the first question we conclude that, in accordance to the theory of tax incidence, subjects’ behaviour is not affected by salience. On the other hand, concerning the second question, contrary to theoretical predictions, we report evidence of stark differences in average trading prices for LSE principle analysis. Most notably, we observe that tax-on-seller treatment prices are systematically higher, thus revealing a plausible tax-shifting phenomenon.
    Keywords: Tax incidence; Tax salience; Liability Side Equivalence; choice behaviour; laboratory
    JEL: C91 H2 H21 H30
    Date: 2015
  2. By: Hansjörg Blöchliger
    Abstract: The tax on immovable property recently started to regain its former significance, but the tax yield still remains low, with slightly more than 1% of GDP and wide variation across countries. Against this background this paper surveys property tax policy in OECD countries and analyses the efficiency, distributional and stabilisation properties of property tax. Despite rising house prices, property tax revenues are modest, because tax values of property are set below market values; and because myriads of tax exemptions reduce the tax base and tax revenues further. While property taxes are considered the least harmful to growth, a pure land tax is preferable to a tax on investment. Property taxes can be anything from progressive to regressive, depending on tax incidence and the distribution of immovable property across income groups. Property taxes tend to stabilise house prices, although the effect is rather small. Finally, property taxes can underpin sustainable land use. Political economy factors largely explain resistance against property tax reform, which, among others, might include measures for poor and cash-strapped households. Property taxes are an overwhelmingly sub-national tax, and property tax reforms that include reforms of intergovernmental fiscal frameworks may turn out to be more successful.<P>Réformer la taxe foncière, parent pauvre du régime fiscal<BR>L’impôt sur la propriété immobilière a récemment commencé à regagner de son ancienne importance, mais les recettes qu’il procure restent faibles, à peine plus de 1 % du PIB et avec de larges variations d’un pays à l’autre. Dans ce contexte, ce document examine les politiques en la matière dans les pays de l’OCDE et analyse les propriétés de l’impôt foncier en termes d’efficacité, de redistribution et de stabilisation. Malgré la hausse des prix des logements, les recettes de l’impôt foncier sont modestes, parce que la valeur fiscale des biens immobiliers est fixée à un niveau inférieur aux prix du marché ; et parce qu’une myriade d’exemptions fiscales réduisent l’assiette d’imposition et minorent les recettes. Les impôts fonciers sont considérés comme les moins préjudiciables à la croissance, et une taxe foncière pure est préférable à une taxe sur l’investissement. Les impôts fonciers peuvent être plus ou moins progressifs ou régressifs, en fonction de l’incidence fiscale et de la distribution des biens immobiliers entre groupes de revenus. Les impôts fonciers ont tendance à stabiliser les prix des logements, bien que cet effet soit assez minime. Enfin, les impôts fonciers peuvent favoriser une utilisation durable des terres. Des facteurs liés à l’économie politique expliquent pour une bonne part la résistance à la réforme de la fiscalité immobilière, qui pourrait englober entre autres des mesures visant les ménages pauvres et à court de liquidités. L’impôt foncier est essentiellement un impôt infranational, et les réformes qui s’emploient également à refondre le cadre budgétaire interadministrations seront probablement plus efficaces.
    Keywords: immovable property tax, local taxation, fiscal federalism, fédéralisme budgétaire, fiscalité locale, impôt sur la propriété immobilière
    JEL: H21 H71 H77
    Date: 2015–04–22
  3. By: Marcelo Piancastelli
    Abstract: In the tax literature, the tax effort index for any country is usually measured by the ratio of the actual tax ratio to the predicted ratio. This reflects mainly the variance in the taxable capacity of a country. A high value of tax effort index indicates that a particular country is collecting more tax than would be predicted, given its tax structure and prevailing economic and social conditions. This paper estimates the tax effort index for a sample of 75 countries for the period 1985/95. It incorporates the most recently available data and also econometric techniques not used before for such a type of analysis. The results are then compared with previous studies encompassing different periods over the last 30 years. The evidence provided in this paper suggests that per capita income, the ratio of trade to GDP, and the share of agriculture in GDP of the product of the agricultural sector are the most consistent explanatory variables of the tax ratio, while several variables used in previous studies, such as the ratio of mining output to GDP, and the ratio of quasi-money to GDP, are not significant in the recent period under analysis. This paper shows those countries that have improved their tax performance, measured by the tax effort index, as well as those which have a less favourable performance. Tax ratios and tax effort comparisons are also made among the developed and developing countries according to income groups and different continents.
    Date: 2015–01
  4. By: André Decoster; Serio Perelman; Dieter Vandelannoote; Toon Vanheukelom; Gerlinde Verbist
    Abstract: Belgium has seen major changes in its tax-benefit system over the past twenty years. These changes have, to a large extent, co-determined the evolution of disposable incomes of Belgian households on one hand, and their incentives to work on the other. In this paper we assess equity and efficiency aspects of changes in tax-benefit policies over the full course of 1992-2012. By simulating effects of current and past tax-benefit policies using the microsimulation model MEFISTO-EUROMOD, we summarize the shifts in policy orientation over this period using two summary measures of redistribution and work incentives. Our three main findings are: 1) the changes in the tax-benefit system have to a large extent been pro-poor and redistribution has been increased; 2) the introduction of an earned income tax credit and the lowering of personal income taxes has contributed to improve work incentives, but this effect was partially eroded by an increase in unemployment benefits since 2000; 3) the results crucially depend on whether one chooses as 'no policy change' counterfactual indexation with inflation or indexation with nominal wage growth.
    Keywords: labour supply, marginal cost of public funds, microsimulation, redistribution, tax-benefit system, taxation
    JEL: H21 H41 J20
    Date: 2015–04
  5. By: Francisco Eduardo Barreto de Oliveira
    Abstract: The paper analyses conceptual issues involved in the design and/or reform of social security systems classified in three major groups: general characteristics, costing and operational issues. O paper analisa questões conceituais envolvidas no desenho/reforma de sistemas de seguridade social, classificados conforme três grandes grupos: características gerais, aspectos de custeio e operacionaisO paper analisa questões conceituais envolvidas no desenho/reforma de sistemas de seguridade social, classificados conforme três grandes grupos: características gerais, aspectos de custeio e operacionais..
    Date: 2015–01

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