nep-pub New Economics Papers
on Public Finance
Issue of 2017‒08‒27
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Taxation with Private Insurance By Yongsung Chang; Yena Park
  2. Corporate Taxation in the Open Economy without Pareto By Bawa, Siraj
  3. Fiscal policy in developing countries: Do governments wish to have procyclical fiscal reactions? By GBATO, ANDRE
  4. Banks in Tax Havens: First Evidence based on Country-by-Country Reporting By Bouvatier, Vincent; Capelle-blancard, Gunther; Delatte, Anne-Laure
  5. Impact of taxation on growth in Subsaharan Africa: new evidence based on a new data set By GBATO, ANDRE
  6. Goods and Services Tax and Kerala Economy By Kumar, Dr.B.Pradeep; Ramya, Dr.R

  1. By: Yongsung Chang (University of Rochester, Yonsei University); Yena Park (University of Rochester)
    Abstract: We derive a fully nonlinear optimal income tax schedule in the presence of a private insurance market. The optimal tax formula is expressed in terms of sufficient statistics?such as the Frisch elasticity of labor supply, social preferences, and hazard rates of the income distributions?as in the standard Mirrleesian taxation without private insurance (e.g., Saez (2001)). However, in the presence of a private market, the standard sufficient statistics are no longer sufficient. The optimal tax rate also depends on how private savings interact with public insurance? through substitution and crowding in/out. Based on our formula, we compute the optimal tax schedule using a quantitative general equilibrium model calibrated to reproduce the U.S. income distribution.
    Keywords: Optimal Taxation, Private Insurance, Crowding Out, Mirrelsian Tax
    JEL: H21 H23 D51
    Date: 2017–08
  2. By: Bawa, Siraj
    Abstract: This paper studies how optimal corporate tax rates differ when firm productivities are drawn from a lognormal distribution instead of a Pareto, the literature standard, in a model of monopolistic competition. Recent literature has demonstrated that lognormal distributions are a better fit for firm productivities; I not only find that this result holds in developing economies, but that the distributional choice has significant implications for the properties of the optimal corporate tax rates. I show this using an enhanced Melitz model with heterogeneous sectors subject to a framework of corporate taxation. This tax framework consists of a single economy-wide statutory tax that is augmented by a set of sector-specific depreciation allowance rates which distort the effective tax rate by sector. I find that using the Pareto distribution mutes a transmission channel between the corporate tax instruments and the equilibrium variables which leads to qualitative different policy implications compared to those obtained under the lognormal distribution. Additionally, my model can reconcile recent empirical studies that come to seemingly conflicting conclusions about the effects of statutory tax rates on export dynamics. I do this by showing that the level of the sector-specific tax rate determines whether or not changing the statutory tax rate will increase the probability of firms engaging in exporting.
    Keywords: Corporate tax policy, Melitz-Pareto, asymmetric sectors, trade and taxation.
    JEL: F12 H25
    Date: 2017–06
    Abstract: This study aimed to analyze the intentionally fiscal position of the governments of developing countries. Our results suggest that a significant proportion of developing countries adopts counter-cyclical positions. However, forecasting errors weak their positions. Results lead to conclude that if developing countries want to increase the effectiveness of their fiscal policies, they must build the skills of their forecast offices, and enhance the political and institutional framework governing the budget process.
    Keywords: Fiscal policy; Real Time Data; Developing countries; Generalized moment method, Revision errors
    JEL: C23 E30 E62 H30 H60
    Date: 2017–08–19
  4. By: Bouvatier, Vincent; Capelle-blancard, Gunther; Delatte, Anne-Laure
    Abstract: Since the Great Financial Crisis, several scandals have exposed a pervasive light on banks' presence in tax havens. Taking advantage of a new database, this paper provides a quantitative assessment of the importance of tax havens in international banking activity. Using comprehensive individual country-by-country reporting from the largest banks in the European Union, we provide several new insights: 1) The average effect of being a tax haven is an extra presence of foreign affiliates by 168%; 2) For EU banks, the main tax havens are located within Europe: Luxembourg, Isle of Man and Guernsey rank at the top; 3) Attractive tax rates are not sufficient to drive extra activity; 4) But lenient regulatory environment attract extra commercial presence; 4) Banks avoid the most opaque countries with weak governance; 5) The tax savings for EU banks is estimated between Euro 1 billion and Euro 3.6 billion.
    Keywords: Tax evasion; International banking; Tax havens; Country-by-country reporting
    JEL: F23 G21 H22 H32
    Date: 2017–08
    Abstract: In this study, we empirically test the impact of taxation on the long-term growth of a sample of 32 countries in sub-Saharan Africa. The results indicate a zero effect of taxation on long-term growth. Moreover, the results suggest a significant negative effect of indirect taxes and taxes on individuals in short term. Consequently, the use of taxation as an instrument of intervention is not appropriate in the region. The countries of the region could therefore increase their growth, if the design of fiscal policy rests solely on logic of fiscal neutrality.
    Keywords: Growth, Taxation, Heterogeneous panels, Cross-sectional dependence
    JEL: C13 E62 H30 O40
    Date: 2017
  6. By: Kumar, Dr.B.Pradeep; Ramya, Dr.R
    Abstract: GST has become a reality in India. GST is a comprehensive tax regime which heralds not only the dawn of a new era in the tax realm of the country, but also it ushers in a ‘behavioural change’ in the transactions that happen in the economy. Many countries have embraced GST as an efficient and profitable indirect tax system. GST bestows many benefits on economies in the form increasing indirect tax proceeds and enhancing the efficiency in economic activities. This paper discusses the pros and cons of implementing GST in India with special emphasis on Kerala Economy.
    Keywords: GST Council, SGST, CGST, IGST, Anti-Profiteering Authority, Input Tax Credit (ITC), GST Net Work (GSTN), GST Compliance Rating, GST Suvidha Providers, Place of Supply, Location of Supply, E-Way Bills, SGDP, Services, Dichotomized Tax System, Fiscal Federalism, Finance Commissions
    JEL: H21 H26 H29
    Date: 2017–07–08

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