nep-pub New Economics Papers
on Public Finance
Issue of 2015‒05‒16
seven papers chosen by

  1. VAT notches By Li Liu; Ben Lockwood
  2. Optimal Taxation and Productive Social Expenditure By Thomas Bassetti; Luciano Greco
  3. Boring Banks and Taxes By Rafael Aigner; Felix Bierbrauer
  4. Prospects for Integrated Carbon Taxes in Canada: Lessons from Federal-Provincial Tax Coordination. By Tracy Snoddon
  5. Value Added Tax and its place in the fiscal system of the Republic of Croatia during the financial crisis By Sonja Cindori
  6. An Assessment of the Performance of the Italian Tax Debt Collection System By Margherita Ebraico; Savino Rua
  7. Corporate income taxation in the Croatian hotel industry in relation to the Mediterranean countries of Europe By Dragan Roller; Sabina Hodžić; Sanja Premec

  1. By: Li Liu (Centre for Business Taxation, University of Oxford); Ben Lockwood (University of Warwick)
    Abstract: We develop a conceptual framework which captures the effect of the VAT system on profit by two effective taxes. This allows (i) predictions of the determinants of voluntary registration and bunching at the registration threshold; (ii) develops a formula for estimating the elasticity of value-added with respect to the statutory tax. We show that the marginal excess burden of the tax on suppliers is measured by this elasticity, extending Feldstein's analysis of the elasticity of taxable income to an indirect tax setting. We bring the theory to the data, using linked administrative VAT and corporation tax records in the UK from 2004-2009. Consistently with the theory, voluntary registration is positively related to the intensity of input use and negatively related to the share of B2C transactions. There is bunching at the VAT threshold, and the amount of bunching is negatively related to the intensity of input use and positively related to the share of B2C transactions, again consistently with the theory. We provide an estimate of the elasticity of the VAT tax base in the range of 0.09 and 0.18.
    Date: 2015
  2. By: Thomas Bassetti (University of Padova); Luciano Greco (University of Padova)
    Abstract: This paper characterizes the optimal tax and expenditure policies in economies where households’ unobservable gross earnings depend on exogenous (or inherited) capabilities and input investments. In a two-class economy, optimal redistribution relies on non-linear income taxation and input public provision only if the poor households demand less input than the rich. In a multi-class economy, optimal redistribution is implemented by usual-shape, non-linear income taxation and uniform public provision of input, if inherited capability and input are economic substitutes. But, when capability and input are complements, optimal redistribution relies only on non-linear income taxation. Numerical analyses show that, when individual productivity is separable in input and capability, these factors are economic substitutes (or complements) if preferences take into account (or not) the income effects.
    Keywords: In-kind redistribution; Non-linear income tax; Public provision of private goods; Opting out; Topping up; Numerical simulations
    JEL: H42 H21
    Date: 2015–04
  3. By: Rafael Aigner (University of Bonn); Felix Bierbrauer (University of Cologne)
    Abstract: How do taxes in the financial sector affect economic outcomes? We analyze a simple general equilibrium model with financial intermediation. We formalize a trade-off between tax policies that burden the owners of banks and tax policies that burden households. We also study the implications of the financial sector's exemption from value added taxation (VAT). Main results are that an increased taxation of the banks' profits goes together with a larger financial sector, as measured by the volume of loans and the employment in banking. We also show that the general presumption that the VAT-exemption is beneficial for banks is unjustified.
    Keywords: Taxation of the financial sector, Financial activities tax, Value added taxation
    JEL: H21 G21 H22
    Date: 2015–04
  4. By: Tracy Snoddon (Wilfrid Laurier University)
    Abstract: The global nature of the climate change externality calls for a global response but so far none has emerged. Instead, climate policies are being implemented by subnational and national governments, resulting in a fragmented policy landscape at the national level. This is certainly the case in Canada. While this outcome is not particularly surprising, from an economics perspective, it is arguably more costly, less efficient, and less effective at achieving emissions reductions than a more harmonized approach. Is this outcome the unavoidable price of Canadian federalism? Is a more harmonized carbon tax approach feasible? This paper considers Canada’s experience with three major taxes, jointly occupied by federal and provincial governments. Despite its highly decentralized structure, Canada has a history of tax harmonization and coordination arrangements for these taxes. By examining the evolution of these arrangements, the paper offers insights on the prospects of adopting a more harmonized carbon tax approach to address climate change.
    Keywords: carbon taxes, tax coordination and harmonization, Canada
    JEL: H23 H77 Q58
    Date: 2015–05–08
  5. By: Sonja Cindori (Faculty of law)
    Abstract: Value added tax was introduced in the fiscal system of the Republic of Croatia in 1998 as a flat rate system with a rate of 22 %. Shortly thereafter zero rate and reduced rate of 10% were introduced. Tax rates and their scope have been changing periodically until nowadays when rates are 5%, 13 % and 25% by which the Republic of Croatia takes a leading position regarding the amount of standard rate applicable in the Member States of the European Union.At the beginning of 2015 value added tax legislation is going to be harmonized with the EU legislation completely and will create a basis for a stable and plentiful form of sales taxation, with respect to the fact that Value added tax is the most plentiful taxation revenue of Government Budget of the Republic of Croatia.Latest reforms of the Value Added tax system in the Republic of Croatia concern changes in several areas: tax rate levels, threshold for compulsory registration in the Value added tax system, tax exemptions (by selecting functional principles for certain categories of exemptions), modalities of Value Added tax computation (according to collected or issued invoices) and new control methods of cash turnover. The greatest effect was expected in the area of its buoyancy and resilience during the financial crisis whether there was attempt to indirectly influence its regressive nature. Regardless of changes in the taxation system by the Value added tax, developments in economy and changes in social and economic sphere, Value added tax revenue in the last ten years has been in relatively narrow limits. However, its buoyancy, cheapness of collection and resilience during the financial crisis as advantages of this form of taxation cannot be considered separately but must be placed in the context of current economic conditions.According to the recent efforts of raising the standard rate of Value added tax there is a question of reaching the limits of Croatian tax capacity and real possibilities of setting its goals. Therefore, cheapness and efficiency of tax collection, the stability of tax policy and the balance between scope of tax base and provided exemptions should be an imperative of fiscal policy of the Republic of Croatia, which has to aim at the effectiveness of the implementation of legislation in relation to the tax system as a whole.
    Keywords: financial crisis, tax policy, value added tax, regression, rate, exemptions.
    JEL: K34
  6. By: Margherita Ebraico (Italian Revenue Agency); Savino Rua (European Commission)
    Abstract: This paper provides a comparable estimate of the magnitude of tax debt in Italy and investigates which administrative factors would contribute to explain it. It is inspired by the work of the OECD on comparative tax administration. Our findings show that the level of undisputed tax debt in Italy is close to the EU average, with a decreasing trend since 2008. No more gaps are found in the administration of tax debt management in Italy, when comparing it with that of other EU Member States. The use of technology emerges as a possible area of further attention.
    Keywords: Tax administration, Tax debt, Tax collection
    JEL: H11 H71 H83 K34 K40
    Date: 2015–01
  7. By: Dragan Roller (Faculty of Tourism and Hospitality Management, Opatija, University of Rijeka, Croatia); Sabina Hodžić (Faculty of Tourism and Hospitality Management, Opatija, University of Rijeka, Croatia); Sanja Premec
    Abstract: Purpose – Taxes directly affect business activities of entities in tourism in Mediterranean countries of Europe. This is reflected in service prices, and therefore in the offer and demand for hotel management services. The aim of this paper is to present which Mediterranean countries of Europe carry the largest tax burden with regard to corporate income tax. Design – Three main areas are discussed, namely: corporate income taxation in the hotel industry, tax revenues of Mediterranean countries of Europe and Croatian corporate income tax distribution and tourist destinations. Methodology - The paper provides a comparative analysis of corporate income taxation of hotel industry for Mediterranean countries of Europe. Approach – This paper examines incentives in corporate income tax in Croatian fiscal practice and corporate income taxation in the hotel industry of Mediterranean countries of Europe. This approach is regarded as a considerable contribution to further research on tax burden in the hotel industry. Findings – The hotel industry in Mediterranean countries of Europe is affected by corporate income taxation. Higher taxation of hotel industry in Mediterranean countries of Europe decreases competitiveness of tourist destinations. Originality – The results of this research show that Croatias corporate income tax rate is not as big as in other Mediterranean countries of Europe; however, its economic and financial instability makes Croatia a tourist destination unfavourable for development of hotel industry.
    Keywords: corporate income tax, hotel industry, Mediterranean countries of Europe, fiscal policy
    JEL: L83

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