nep-pub New Economics Papers
on Public Finance
Issue of 2015‒11‒21
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Effects of Increases in Value Added Tax: A Dynamic CGE Approach By Jean Luc Erero
  2. Taxation under Oligopoly in a General Equilibrium Setting By Collie, David R.
  3. Commodity Taxation and Regulatory Competition By Simone Moriconi; Pierre M. Picard; Skerdilajda Zanaj
  4. Voluntary Disclosure Programs for Tax Evaders By Heiner Schmittdiel
  5. Socially Optimal Child-Related Transfers and Personal Income Tax with Endogenous Fertility By Andras Simonovits

  1. By: Jean Luc Erero
    Abstract: This paper analyses the effects of increases in value added tax (VAT) through a dynamic computable general equilibrium model. The database of the model encompasses a social accounting matrix (SAM) for the year 2010. All the important South African taxes are included in the SAM and the household sectors are disaggregated according to income deciles, with the top decile being further split into five groups. Five different simulations are performed, ranging from 1% increase in the VAT to 5% over the period 2012 to 2018. Our findings show that the percentage increase in VAT would not affect lower income households negatively if the higher government revenue flowed to the lower income households. For example, the 1% increase in the VAT rate impacts on the investment through the price of capital. The change in investment means that any adjustment in capital stock will affect the production and demand for labour that might impact on the standard of living of all income groups. The GDP increases slightly by 0.02173% in 2013 and reports a positive change for the period between 2013 and 2018. This shows that in the short run the GDP depends on other variables such as investment and consumption, which likewise are positively affected by this shock.
    Keywords: value added tax, computable general equilibrium model, South Africa
    JEL: C68 E62 H21
    Date: 2015
  2. By: Collie, David R. (Cardiff Business School)
    Abstract: Taxation under oligopoly is analysed in a general equilibrium setting where the firms are large relative to the size of the economy and maximise the utility of their shareholders. It turns out that the model is an aggregative game, which simplifies the comparative statics for the effects of taxation. This novel analysis of taxation leads to a number of counterintuitive results that challenge conventional wisdom in microeconomics. A lump-sum tax may increase the price of the oligopolistic good and decrease welfare whereas a profits tax may decrease the price of the oligopolistic good and increase welfare. An ad valorem tax may decrease the price of the oligopolistic good and increase welfare. Furthermore, in line with conventional wisdom, total tax revenue is always higher with an ad valorem tax than with a specific tax that leads to the same price for the oligopolistic good.
    Keywords: Oligopoly; General Equilibrium; Aggregative Games; Ad Valorem Taxes; Specific Taxes; Profits Taxes; Lump-Sum Taxes
    JEL: C72 D21 D43 D51 H22 H25 L13 L21
    Date: 2015–10
  3. By: Simone Moriconi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Pierre M. Picard; Skerdilajda Zanaj
    Abstract: TThis paper studies competition in commodity taxation and product market regula- tion between trading partner countries. We present a two-country general equilibrium model in which destination-based commodity taxes finance public goods, and prod- uct market regulation affects both the number of firms in the market and product diversity. We provide empirical evidence based on data for 21 OECD countries over the 1990-2008 period. Our results suggest that commodity taxation and product mar- ket regulation are interdependent policies. Theoretically and empirically we find an absence of strategic interaction in commodity taxation between governments. Further- more, we show that domestic regulation has a negative effect on domestic commodity taxation. Finally, we demonstrate theoretically and show empirically that product market regulation is a strategic complementary policy.
    Keywords: Regulation, commodity tax, strategic interactions.
    JEL: F0 H1 H7 H87 L5
    Date: 2015–11
  4. By: Heiner Schmittdiel (Erasmus University Rotterdam, the Netherlands)
    Abstract: In this paper, we develop a model that can explain why governments may want to choose to offer a voluntary disclosure program that allows people who withheld taxes to turn themselves in without punishment. We find that such a leniency rule not only increases government revenue when it comes as a surprise, but even when taxpayers anticipate it.
    Keywords: Tax compliance; voluntary disclosure; guilt
    JEL: H26 K34 K40
    Date: 2015–11–17
  5. By: Andras Simonovits (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology and Department of Economics of CEU)
    Abstract: To compare the systems of child benefits and of family tax deductions, we create a model with endogenous fertility and basic income, also financed from proportional wage taxes. Pensioners are neglected but younger and older workers are distinguished: the former raise children and receive child benefits, while the latter not. Through the balance equation, current average fertility depends on past average fertility. To have a socially optimal positive child benefit, past average fertility has to be less than 1. The deduction's efficiency is presumably lower than the benefit's and may even be lower than that of pure basic income.
    Keywords: progressive income tax, child benefits, family tax deductions, endogenous fertility
    JEL: J13
    Date: 2015–07

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