nep-pub New Economics Papers
on Public Finance
Issue of 2015‒05‒09
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax evasion and measurement error: An econometric analysis of survey data linked with tax records By Paulus, Alari
  2. Tax attractiveness and the allocation of risk within multinationals By Dinkel, Andreas
  3. Tax attractiveness and the location of patents By Dinkel, Andreas; Schanz, Deborah
  4. Tax compliance and information provision: A field experiment with small firms By Doerrenberg, Philipp; Schmitz, Jan
  5. A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare By Jan Siegmeier; Linus Mattauch; Max Franks; David Klenert; Anselm Schultes; Ottmar Edenhofer

  1. By: Paulus, Alari
    Abstract: We use income survey data linked with tax records at the individual level for Estonia to estimate the determinants and extent of income tax compliance in a novel way. Unlike earlier studies attributing income discrepancies between such data sources either to tax evasion or survey measurement error, we model these processes jointly. Focussing on employment income, the key identifying assumption made is that people working in public sector cannot evade taxes. The results indicate a number of socio-demographic and labour market characteristics, which are associated with non-compliance. Overall, people in the bottom and the top part of earnings distribution evade much more and about 12% of wages and salaries in total are underreported, which is very substantial for a major income source subject to third party reporting and tax withholding.
    Date: 2015–05–07
  2. By: Dinkel, Andreas
    Abstract: This paper analyzes the impact of countries' tax attractiveness on the allocation of risk within multinational groups. Our dataset contains subsidiaries located in 32 European countries and owned by parents from 90 different countries globally. We show that tax symmetry positively influences the relative amount of risk allocated to subsidiaries. Both time and amount limitations of loss offset rules matter. Higher statutory corporate tax rates in the country of the subsidiary decrease the relative amount of risk taken.
    Keywords: International taxation,Tax attractiveness,Location decision,Multinational enterprise,Risk allocation
    JEL: F23 G32 H25
    Date: 2015
  3. By: Dinkel, Andreas; Schanz, Deborah
    Abstract: This paper analyzes the impact of taxation on the location of patents within multinational groups. Based on groups with parents from 36 countries globally and their patent holdings in 36 European countries, we provide insight into the determinants of three subsequent decisions: (1) the decision of whether to locate patents abroad; (2) in which countries to locate patents; and (3) how many patents to locate in each country. Our findings indicate that multinationals take the tax attractiveness of countries into account when making these decisions. Specifically, we show that the statutory tax rate, the taxation of royalties, R&D incentives, and transfer pricing rules help to explain the patent-location choices of multinationals.
    Keywords: International taxation,Tax attractiveness,Intellectual property,Location decision,Multinational enterprise
    JEL: H25 H73 F23
    Date: 2015
  4. By: Doerrenberg, Philipp; Schmitz, Jan
    Abstract: We study tax compliance in Slovenia using data generated in a field experiment. Small accounting companies were randomly assigned to an untreated control group and two treatment groups. Companies in the first treatment group received a letter that highlighted the importance of paying taxes and informed about the likelihood of becoming subject to an audit. In the second treatment group, tax officers from the tax authorities handed out in person the same letter that companies in the first treatment group received by post. The results indicate that such letters can increase compliance, and trigger even more compliance if handed over in person. These findings are in line with the theoretical predictions that we derive to rationalize the experiment.
    Keywords: Tax Compliance,Audits,Randomized Field Experiment,Tax authority,Information provision
    JEL: H20 H32 H50 C93
    Date: 2015
  5. By: Jan Siegmeier (Technische Universität Berlin and Mercator Research Institute on Global Commons and Climate Change); Linus Mattauch (Technische Universität Berlin and Mercator Research Institute on Global Commons and Climate Change); Max Franks (Technische Universität Berlin and Potsdam Institute for Climate Impact Research); David Klenert (Technische Universität Berlin and Potsdam Institute for Climate Impact Research); Anselm Schultes (Technische Universität Berlin and Potsdam Institute for Climate Impact Research); Ottmar Edenhofer (Technische Universität Berlin, Mercator Research Institute on Global Commons and Climate Change and Potsdam Institute for Climate Impact Research)
    Abstract: Climate change economics mostly neglects sizeable interactions of carbon pricing with other fiscal policy instruments. Conversely, public finance typically overlooks the effects of future decarbonization efforts when devising instruments for the major goals of fiscal policy. We argue that such a compartmentalisation is undesirable: policy design taking into account such interdependencies may enhance welfare and change the distribution of mitigation costs within and across generations. This claim is substantiated by analyzing six interactions between climate policy and public finance that are insufficiently explored in current research: (i) reduced tax competition in an open economy, (ii) portfolio effects induced through climate policy, (iii) restructuring public spending, (iv) revenue recycling for productive public investment, (v) greater intragenerational equity through appropriate revenue recycling and (vi) intergenerational Pareto-improvements through intertemporal transfers. We thereby structure the hitherto identified interactions between climate change mitigation and public finance and show that jointly considering carbon pricing and fiscal policy is legitimate and mandatory for sound policy appraisal.
    Keywords: Carbon Pricing, Taxation, Public Spending, Redistribution, Policy Interactions
    JEL: B41 H21 H23 H54 H60 Q54
    Date: 2015–04

This nep-pub issue is ©2015 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.