nep-pub New Economics Papers
on Public Finance
Issue of 2017‒03‒12
five papers chosen by

  1. Optimal Taxation with Private Insurance By Yongsung Chang; Yena Park
  2. Institutional quality, economic development and the performance of VAT. By Romain Houssa; Kelbesa Megersa
  3. International taxation and productivity effects of M&As By Todtenhaupt, Maximilian; Voget, Johannes
  4. The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements By Braun, Julia; Zagler, Martin
  5. Local taxation, land use regulation, and land use: A survey of the evidence By Hansjörg Blöchliger; Christian Hilber; Olivier Schöni; Maximilian von Ehrlich

  1. By: Yongsung Chang (University of Rochester and Yonsei University); Yena Park (University of Rochester)
    Date: 2017–03
  2. By: Romain Houssa (CRED, University of Namur); Kelbesa Megersa (CRED, University of Namur)
    Abstract: In this paper we test, empirically, to which extend the Value- Added Tax (VAT) is a relevant-policy option for developing countries aiming to improve upon their domestic resources mobilization (DRM). First, we investigate the contribution of VAT to tax collection across developed and developing countries. We also provide a comparative analysis between Sub-Saharan Africa (SSA) and other developing countries. Second, we examine the role of institutional quality in enhancing domestic-tax mobilization in the presence of VAT adoption. For these purposes, we employ a panel data model that takes into account the standard determinants of the tax-effort function as well as the institutional and geographical characteristics of countries. Analysis of data from 149 countries over the 1970 - 2013 period indicates that VAT adoption improved tax-revenue collection in both developed and developing (SSA and non SSA) countries. Moreover, the marginal effect of VAT adoption is estimated to be strong for SSA and other developing countries as compared to their developed counterparts. The positive effect of VAT on tax collection in SSA is reassuring because some earlier studies were not able to identify an overall positive effect for the region. We show that analysis of data over the recent period is important to find a positive effect for SSA. As regards the role of institutional quality, we find that, tax-revenue collection is higher in countries with a betterinstitutional quality - even before VAT adoption. Interestingly, we show that the gain from adopting VAT is maximized in such countries. Given VAT is by now adopted in almost all countries across the world, our findings suggest the need to promote reforms to improve the quality of institutions that facilitate tax collection in developing countries.
    Keywords: Value-Added Tax (VAT), Domestic Resources Mobilization (DRM), Tax Reform, Institutional Quality, Economic development
    JEL: H20 H21 H25 H26 O17 O11
    Date: 2017–02
  3. By: Todtenhaupt, Maximilian; Voget, Johannes
    Abstract: We investigate the effect of international differences in corporate taxation on the realization of productivity gains in M&A deals. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus mitigate the resulting productivity improvement. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we estimate that a 1 percentage point increase in the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain by 4.5%. This effect is less pronounced when firms can use international profit shifting to attenuate effective differences in taxation. In a complementary analysis, we use an event study design and a fixed effects model to explore the timing of the response of productivity, as well as, labor and capital input to the tax rate differential after the merger separately for the acquirer and the target. We show that our findings are mainly driven by deals with targets residing in locations with a tax advantage with respect to the acquirer. In these transactions, tax differentials reduce the post-merger adjustment in the target firm and inhibit the full realization of productivity gains.
    Keywords: M&A,productivity,international taxation
    JEL: F23 G34 H25 D24
    Date: 2017
  4. By: Braun, Julia; Zagler, Martin
    Abstract: Out of a total of 2,976 double tax agreements (DTAs), some 60% are signed between a developing and a developed economy. As DTAs shift taxing rights from capital importing to capital exporting countries, the prior would incur a loss. We demonstrate in a theoretical model that in a deal one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA, this requires compensation from the capital exporting country to the capital importing country. We provide empirical evidence that such compensation is indeed paid, for instance in the form of bilateral official development assistance, which increases on average by six million US$ in the year of the signature of a DTA.
    Keywords: developing countries,foreign aid,double taxation agreements
    JEL: K33 F53 H25 H87 D82
    Date: 2017
  5. By: Hansjörg Blöchliger (OECD); Christian Hilber (London School of Economics); Olivier Schöni (University of Bern); Maximilian von Ehrlich (University of Bern)
    Abstract: This paper surveys the theoretical and empirical research on the relationship between local taxation, land use regulation and land use patterns. The findings can be summarized as follows: 1) In more fiscally decentralized settings, sub-national land use regulation and fiscal policies encourage urban sprawl. In contrast, in more centralized settings, restrictive urban containment policies and a lack of local fiscal incentives for land development tend to generate housing shortages. 2) Certain fiscal instruments affect the type and composition of land development, e.g. the share of residential versus commercial development. Removing local fiscal incentives for certain property types reduces the amount of land allocated for that type and increases its price. 3) In more decentralized settings, local land use policies aimed at containing or modifying urban growth are ineffective since mobile individuals can circumvent local restrictions by sorting into nearby jurisdictions that offer the preferred combination of land consumption and public services. 4) Expanding transportation networks enables households and firms to move to suburban areas, prompting the central city population to shrink and encouraging sprawl, particularly near major highways. 5) In fiscally decentralized settings, sub-urbanization is associated with a growing political power of homeowners. Homeowners tend to get fiscal zoning policies enacted – mainly via minimum lot size restrictions – that selectively attract well-off local taxpayers. Fiscal zoning thus imposes barriers to local development and raises property values, while at the same time facilitating sprawl. Overall, fiscal policy and land use regulation strongly interact, and governments must align those policies carefully to achieve land-use objectives effectively. Fiscalité locale, réglementation d’urbanisme et occupation des sols : Étude empirique Ce document étudie les travaux de recherche théoriques et empiriques consacrés aux relations entre fiscalité locale, réglementation d’urbanisme et modes d’occupation des sols. Les résultats peuvent être résumés comme suit : 1) Dans les pays qui pratiquent la décentralisation budgétaire, la réglementation d’urbanisme et les politiques budgétaires au niveau infranational encouragent l’étalement urbain. À l’inverse, dans les pays plus centralisés, des politiques restrictives de maîtrise de l’étalement des villes et le manque d’incitations budgétaires locales en faveur de l’aménagement du territoire ont tendance à entraîner une pénurie de logements. 2) Certains instruments budgétaires influent sur le type et la composition de l’aménagement du territoire, par exemple l’importance de la construction de logements par rapport à celle de bâtiments à usage commercial. La suppression des incitations budgétaires locales en faveur de certains types de biens réduit la surface des sols qui leur sont affectés et augmente leurs prix. 3) Dans les pays à structure plus décentralisée, les politiques locales d’occupation des sols visant à limiter ou à modifier la croissance urbaine sont inefficaces car les individus mobiles peuvent contourner les restrictions locales en s’établissant dans les juridictions voisines qui offrent l’équilibre recherché entre occupation des sols et services publics. 4) Le développement des réseaux de transport permet aux ménages et aux entreprises de s’établir en zones périphériques, ce qui accélère la désertification des centres villes et favorise l’étalement urbain, surtout le long des routes à grande circulation. 5) Dans les pays où la gestion budgétaire est décentralisée, le développement des banlieues est associé au pouvoir politique croissant des propriétaires fonciers. Ceux-ci font généralement pression pour que des mesures d’urbanisme obéissant à des considérations budgétaires soient prises – essentiellement en fixant une taille minimale des lots – qui favorisent les contribuables plus aisés. Aussi, les décisions d’urbanisme qui répondent à des objectifs budgétaires freinent le développement local et augmentent la valeur des biens, tout en favorisant l’étalement urbain. Globalement, la politique budgétaire et la réglementation d’urbanisme sont étroitement liées, et les pouvoirs publics doivent harmoniser ces politiques pour atteindre efficacement les objectifs d’occupation des sols.
    Keywords: fiscal competition, fiscal instruments, land use patterns, land use regulations, sprawl, urban density
    JEL: H2 H3 H4 H7 R3 R4 R5
    Date: 2017–03–07

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