nep-pub New Economics Papers
on Public Finance
Issue of 2017‒01‒08
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Are the social security benefits of pensions or child-care policies best financed by a consumption tax? By Jinno, Masatoshi; Yasuoka, Masaya
  2. Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence By Arik Levinson
  3. Fiscal Policy, Inequality and the Poor in the Developing World - Working Paper 441 By Nora Lustig
  4. Modelling corporate tax reforms in the EU: New simulations with the CORTAX model By à lvarez-Martínez, María Teresa; Barrios, Salvador; d'Andria, Diego; Gesualdo, Maria; Pontikakis, Dimitrios; Pycroft, Jonathan
  5. In-depth analysis of tax reforms using the EUROMOD microsimulation model By Fidel Picos; Marie-Luise Schmitz
  6. Dynamic scoring of tax reforms in the European Union By Salvador Barrios; Mathias Dolls; Anamaria Maftei; Andreas Peichl; Sara Riscado; Janos Varga; Christian Wittneben
  7. Partial decentralization and its influence on local governments’ spending policy. An analysis of spending for teachers and other resources needed for schools. By Agnieszka Kopańska
  8. Corporate Income Tax Compliance Costs and their Determinants: Evidence from Greece By Stamatopoulos, Ioannis; Hadjidema, Stamatina; Eleftheriou, Konstantinos
  9. The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty in Uganda - Working Paper 443 By Jon Jellema , Nora Lustig , Astrid Haas and Sebastian Wolf

  1. By: Jinno, Masatoshi; Yasuoka, Masaya
    Abstract: Our paper sets an endogenous fertility model and examines how tax revenues derived from a consumption tax should be used for social security benefits such as pension and child-care policies. An additional pension financed by a consumption tax can achieve Pareto-improving allocations. Child allowances and an education subsidy decrease the older generation's utility because of tax burdens and the lack of additional benefit. Even if child allowances can raise the share of young people in society and some future generation's utility, that future generation's utility decreases because of a decrease in income growth. However, with certain parametric conditions, an education subsidy can raise every generation's utility, except for that of the older generation, because of the increase in income growth.
    Keywords: Endogenous fertility, Human capital, Child allowance, Education subsidy, Pension
    JEL: H20 H55 I20 J13
    Date: 2016–12–21
  2. By: Arik Levinson
    Abstract: Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption in the United States: taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.
    JEL: H23
    Date: 2016–12
  3. By: Nora Lustig
    Abstract: Using comparable fiscal incidence analysis, this paper examines the impact of fiscal policy on inequality and poverty in twenty-five countries for around 2010. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. Fiscal policy increases poverty in four countries using US$1.25/day PPP poverty line, in 8 countries using US$2.50/day line, and 15 countries using the US$4/day line (over and above market income poverty). While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing except for Jordan.
    Keywords: fiscal incidence, social spending, inequality, poverty, developing countries
    JEL: D31 H5 H22 I13
    Date: 2016–11
  4. By: Ã lvarez-Martínez, María Teresa (European Commission - JRC); Barrios, Salvador (European Commission - JRC); d'Andria, Diego (European Commission - JRC); Gesualdo, Maria (European Commission - JRC); Pontikakis, Dimitrios (European Commission - JRC); Pycroft, Jonathan (European Commission - JRC)
    Abstract: This study investigates the economic impact of a recent proposal for a common corporate tax base (CCTB), European Commission (2016a), and a common consolidated corporate tax base with formula apportionment (CCCTB) within the EU, European Commission (2016b). On top of the common base, it considers proposals to reduce the debt bias in corporate taxation. To do so, we employ an applied general equilibrium model (CORTAX) covering all EU Member States, featuring different firm types and modelling many key features of corporate tax regimes, including multinational profit shifting, investment decisions, loss compensation and the debt-equity choice of firms. First, the economic impact of C(C)CTB is assessed, restricting the scope of the reforms to multinationals only. Macroeconomic results show that the common tax base simulations directly affect the cost of capital, which on average falls across the EU, boosting investment, and therefore driving the increase in GDP. Second, C(C)CTB is simulated together with proposals to reduce or eliminate the debt bias in corporate taxation, principally: the comprehensive business income tax (CBIT), the allowance for corporate equity (ACE) and the allowance for corporate capital (ACC). From a financing prospective, all proposals incentivise firms to rely less on debt-financing. From a macroeconomic perspective, the simulations which narrow the tax base by introducing addition deductions, i.e. ACE and ACC, raise GDP, despite the fact that the (ex-ante) CIT revenue is maintained by adjusting the CIT rate. The opposite is the case for the CBIT, which causes a fall in GDP. Third, a group of sensitivity simulations are presented to check for robustness. Among the insights from the sensitivity simulations, one notes that the inclusion of domestic firms in the CCCTB proposal somewhat increases the positive impact on GDP. A broader harmonised tax base results in lower welfare and GDP outcomes than a narrower harmonised tax base, because it more directly impacts the marginal investment decision. Reducing profit shifting slightly lowers investment, though on balance does not negatively impact welfare. The model results are robust to varying the capital-labour substitutability. In summary, the results of this economic modelling evaluation suggest that a fairer and more efficient tax system can be introduced whilst maintaining, and perhaps improving, GDP and welfare in the EU.
    Keywords: Computable General Equilibrium model, CORTAX, CCTB, CCCTB, Profit-shifting
    Date: 2016–12
  5. By: Fidel Picos (European Commission - JRC); Marie-Luise Schmitz (European Commission - JRC)
    Abstract: In the aftermath of the financial and sovereign debt crisis, the need for a better understanding of the fiscal and equity implications of national tax policy reforms is greater than ever. National fiscal policies have a significant share in paving the way for economic recovery, fiscal consolidation and reducing looming inequality problems. The present work sets out a consistent framework for the in-depth country analyses of tax reforms using EUROMOD performed by the European Commission services in the context of the European Semester. Three examples of policy analysis are presented with the focus being on the provision of correct inferences alongside the typically analysed estimates and indicators.
    Keywords: Fiscal policy analysis, European Semester, survey data, microsimulation, variance estimation
    JEL: H23 H24 H53 C83
    Date: 2016–12
  6. By: Salvador Barrios (European Commission - JRC); Mathias Dolls (ZEW); Anamaria Maftei (European Commission - JRC); Andreas Peichl (ZEW); Sara Riscado (European Commission - JRC); Janos Varga (European Commission – DG ECFIN); Christian Wittneben (ZEW)
    Abstract: In this paper, we present a dynamic scoring analysis of tax reforms for European countries. In this analysis we account for the feedback effects resulting from the adjustment in the labour market and for the economy-wide reaction to tax policy changes. We combine the microsimulation model EUROMOD, extended to incorporate an estimated labour supply model, with the new Keynesian DSGE model QUEST, used by the European Commission for analysing fiscal and structural reform in EU member states. These two models are connected in two ways: by introducing tax policy shocks in QUEST, derived from computing changes in implicit tax rates using EUROMOD; and by calibrating the elasticity of labour supply and the non-participation rates, by skill categories, in QUEST from values calculated using EUROMOD and the estimated labour supply function. Moreover, we discuss aggregation issues and the consistency between the micro and macro modelling of labour supply and interpret the model interaction in terms of tax incidence analysis. We illustrate the methodological approach with the results obtained when scoring specific reforms in three EU Member States, namely, Italy, Belgium and Poland. We compare two different scenarios – one in which the behavioural response to tax changes over the medium term is ignored and another scenario where this behavioural/micro-dimension is embedded into the microsimulation model. In this particular set-up, we do not find evidence of strong second-round effects, and the fiscal and distributional effects of the reforms tend to overlap in both scenarios. We attribute these results to existing rigidities in labour and product markets, which have shrunk further the small tax policy shocks introduced into the macroeconomic model.
    Keywords: Dynamic scoring, tax reforms, first and second round effects, labour market behaviour
    Date: 2016–12
  7. By: Agnieszka Kopańska (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The aim of the paper is to analyze how limits in revenue and spending autonomy of sub-sovereign governments influence these governments’ decisions. The analysis is focused on Polish towns current spending for schools in years 2002-2013. It presents that revenue autonomy increases towns spending, however the results are different for various categories of expenditure. The expenses were disaggregated for spending for teachers and other schools’ recourses. The first category is the most important in schools’ budget and in Poland is strongly (but not completely) determined by central regulations. The second category is more decentralized. It is presented that less decentralized spendings are unified among towns and are higher in more revenue’ autonomous towns, the spending autonomy doesn’t influence them. In case of more decentralized tasks, differences among municipalities are important, expenditure is influenced by spending autonomy, not by revenue autonomy. These results show that less autonomous tasks crowd out others.
    Keywords: partial decentralization, spending and revenue autonomy, local government spending policy
    JEL: H72 H75 H77
    Date: 2016
  8. By: Stamatopoulos, Ioannis; Hadjidema, Stamatina; Eleftheriou, Konstantinos
    Abstract: This paper examines the corporate income tax compliance costs and their determinants by analyzing survey and financial statements data from firms operating in Greece. We find that corporate tax compliance costs are of considerable size and vary with several firm-specific characteristics, including the firm’s size, its age, the sector in which it operates, its location and its legal form. The paper intends to raise awareness regarding the impact of tax compliance costs, especially for countries, such as Greece, that were significantly affected by the economic and financial crisis.
    Keywords: corporate taxes; compliance costs; Greece
    JEL: H25 M21
    Date: 2016–12–21
  9. By: Jon Jellema , Nora Lustig , Astrid Haas and Sebastian Wolf
    Abstract: This paper uses the 2012/13 Uganda National Household Survey to analyze the redistributive effectiveness and impact on poverty and inequality of Uganda’s revenue collection instruments and social spending programs. Fiscal policy – including many of its constituent tax and spending elements – is inequality-reducing in Uganda, but the reduction of inequality due to fiscal policy in Uganda is lower than other countries with similar levels of initial inequality, a result tied to low levels of spending in Uganda generally. The impact of fiscal policy on poverty is negligible, while the combination of very sparse coverage of direct transfer programs and nearly complete coverage of indirect tax instruments means that many poor households are net payers into, rather than net recipients from, the fiscal system. As Uganda looks ahead to increased revenues from taxation and concurrent investments in productive infrastructure, it should take care to protect the poorest households from further impoverishment from the fiscal system.
    Keywords: fiscal incidence, poverty, inequality, fiscal policy, Uganda
    JEL: D31 D62 H22 H23 I38
    Date: 2016–11

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