nep-pub New Economics Papers
on Public Finance
Issue of 2017‒03‒19
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Tax Administration By Michael Keen; Joel Slemrod
  2. The Macroeconomic Effects of Income and Consumption Tax Changes By Anh D.M.Nguyen; Luisanna Onnis; Raffaele Rossi
  3. Differential Taxation and Occupational Choice By Gomes, Renato; Lozachmeur, Jean-Marie; Pavan, Alessandro
  4. How Buoyant is the Tax System? New Evidence from a Large Heterogeneous Panel By Paolo Dudine; João Tovar Jalles

  1. By: Michael Keen; Joel Slemrod
    Abstract: This paper sets out a framework for analyzing optimal interventions by a tax administration, one that parallels and can be closely integrated with established frameworks for thinking about optimal tax policy. Its key contribution is the development of a summary measure of the impact of administrative interventions—the “enforcement elasticity of tax revenue†—that is a sufficient statistic for the behavioral response to such interventions, much as the elasticity of taxable income serves as a sufficient statistic for the response to tax rates. Amongst the applications are characterizations of the optimal balance between policy and administrative measures, and of the optimal compliance gap.
    Keywords: Tax administration;Optimal taxation;Tax elasticity;Tax rates;Tax administration, tax compliance, optimal taxation
    Date: 2017–01–20
  2. By: Anh D.M.Nguyen (Applied Macroeconomic Research Division, Economics Department, Bank of Lithuania); Luisanna Onnis (Department of Economics, University of Sheffield); Raffaele Rossi (Department of Economics, University of Manchester)
    Abstract: Do consumption and income tax changes affect the economy differently? We answer this question by estimating structural VARs, where we proxy the latent tax shocks with a newly constructed narrative account of income and consumption tax liability changes in the United Kingdom. We find that income tax shocks have large short run effects on GDP, private consumption and investment. The implied income tax present-value multiplier is around 2.7. The effects of consumption tax cuts are modest and not statistically different from zero on GDP and investment and only marginally expansionary on private consumption. These results indicate that i) it is crucial to distinguish between direct and indirect taxation when studying the transmission mechanism of fiscal policy, and ii) consistent with conventional public finance theories, consumption taxes are less distortive than income taxes.
    Keywords: fiscal policy, narrative account, consumption taxation, income taxation, Proxy-SVAR
    JEL: E62 H24 H25 H31
    Date: 2017–02
  3. By: Gomes, Renato; Lozachmeur, Jean-Marie; Pavan, Alessandro
    Abstract: We develop a framework to study optimal sector-specific taxation, where each agent chooses an occupation by comparing her skill differential with the tax burden differential across sectors. Because skills are not perfectly transferable, the Diamond-Mirrlees theorem (according to which the second-best entails production efficiency) fails: social welfare can be increased by inducing some agents to join the sector in which their productivity is not the highest. At the optimum, income taxes balance the marginal losses from inter-sector migration with the marginal gains from tailoring tax schedules to the distribution of productivities in each sector (“tagging”). A calibrated model indicates that sector-specific taxation generates substantive welfare gains when skill transferability decreases with income, as it enables the government to increase average taxes on high earners with large wage premia.
    Keywords: income taxation, occupational choice, sales taxes, sector-specific taxation, production efficiency
    JEL: C72 D62
    Date: 2017–03
  4. By: Paolo Dudine; João Tovar Jalles
    Abstract: In this paper we provide short- and long-run tax buoyancy estimates for 107 countries (distributed between advanced, emerging and low-income) for the period 1980–2014. By means of Fully-Modified OLS and (Pooled) Mean Group estimators, we find that: i) for advanced economies both long-run and short-run buoyancies are not different from one; ii) long run tax buoyancy exceeds one in the case of CIT for advanced economies, PIT and SSC in emerging markets, and TGS for low income countries, iii) in advanced countries (emerging market economies) CIT (CIT and TGS) buoyancy is larger during contractions than during times of economic expansions; iv) both trade openness and human capital increase buoyancy while inflation and output volatility decrease it.
    Keywords: Tax systems;Tax revenues;Tax elasticity;Business cycles;Developed countries;Emerging markets;Low-income developing countries;Panel analysis;Time series;tax elasticity, recession, error correction model, pooled mean group, short vs long run, fiscal sustainability
    Date: 2017–01–19

This nep-pub issue is ©2017 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.