nep-pub New Economics Papers
on Public Finance
Issue of 2017‒07‒02
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Payroll Taxes and Firm Performance By Egebark, Johan; Kaunitz, Niklas
  2. Estimating Taxable Income Responses with Elasticity Heterogeneity By Kumar, Anil; Liang, Che-Yuan
  3. The welfare gain from switching to tax regulation of fisheries By Frank Jensen; Lars Gårn Hansen
  4. Analysis of tax harmonisation in the SADC By Michael Ade; Jannie Rossouw; Tendai Gwatidzo

  1. By: Egebark, Johan (Research Institute of Industrial Economics (IFN)); Kaunitz, Niklas (Department of Economics, Stockholm University)
    Abstract: The Swedish employer paid payroll tax was reduced substantially for young workers in 2007, causing firms’ average social fees to depend on the age structure of their employees. Using pre-reform conditions to define treated and control firms, we show that the lower costs induced by the reduced taxes have no impact on exit rates or profitability. We find negligible effects on gross investments, and negative, but not statistically significant, effects on labor productivity.
    Keywords: Payroll taxes; Labor costs; Profitability; Labor productivity; Investments; Windfall gain; Tax subsidy; Firm survival
    JEL: D22 H22 J38 L25
    Date: 2017–06–20
  2. By: Kumar, Anil (Research Department, Federal Reserve Bank of Dallas); Liang, Che-Yuan (Department of Economics)
    Abstract: We explore the implications of heterogeneity in the elasticity of taxable income (ETI) for tax-reform based estimation methods. We theoretically show that existing methods yield elasticities that are biased and lack policy relevance. We illustrate the empirical importance of our theoretical analysis using the NBER tax panel for 1979-1990. We show that elasticity heterogeneity is the main explanation for large differences between estimates in the previous literature. Our preferred, newly suggested method yields elasticity estimates of approximately 0.7 for taxable income and 0.2 for broad income.
    Keywords: elasticity of taxable income; elasticity heterogeneity; tax reforms; panel data; preference heterogeneity
    JEL: D11 H24 J22
    Date: 2017–03–29
  3. By: Frank Jensen (Department of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: Theoretical papers find that taxes are preferred over individual transferable quotas (ITQs) when fisheries regulators are uncertain about either biological growth or the extent of non-compliance with regulations. However, the size of the welfare gain from switching to taxes has not previously been investigated empirically. Based on estimated profit and growth functions, we simulate this gain for the Danish cod fishery in the Kattegat and find a welfare gain of less than 2%. We also develop a simple indicator which can be used to approximate the welfare gain of switching to tax regulation for other fisheries. The value of the indicator is calculated for a number of fisheries worldwide for which the necessary data have been published and we find that the gain from a switch to taxes is typically between 1.5% and 2.5% (in no case greater than 4.2%). We, therefore, conclude that the switch to tax regulation of fisheries, which has been recommended in prior theoretical literature, is of little practical importance.
    Keywords: taxes, ITQs, uncertainty, cod in Kattegat, actual welfare gain
    JEL: Q22 C54 D62 H23 Q28
    Date: 2017–06
  4. By: Michael Ade; Jannie Rossouw; Tendai Gwatidzo
    Abstract: This paper analyses tax harmonisation in the SADC region. Results of first attempt to devise a tax policy harmonisation measure (TPHM) by the use of a cross-sectional and panel data are reported. New methodology of computing optimum tax rates (OTRs) are introduced and a robustness test (via a sensitivity analysis) on the impact of taxation (based on new tax dataset from the TPHM and OTRs computation) on FDI inflows to the SADC is conducted.The research shows a need for the SADC countries to develop policies aimed at collectively expanding their corporate tax base in order to accommodate the relatively low optimum CIT rates. It is also shown that the adoption of an optimum VAT rate by all SADC member countries will reduce the usage of different politically motivated VAT rates by individual member states as instruments to gain voters' confidence. The research shows that, some further policy considerations towards enhanced harmonisation and tax revenue could include developing a benchmarking process with other regional economic groupings such as the EU and the EAC.
    Keywords: SADC; Harmonisation; Tax Policy; Tax Rates; EBA; FDI
    JEL: E60 F15 H21 H25 H27
    Date: 2017–06

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