nep-pub New Economics Papers
on Public Finance
Issue of 2017‒09‒10
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Legal tax liability, legal remittance responsibility and tax incidence: Three dimensions of business taxation By Anna Milanez
  2. The capacity of governments to raise taxes By Oguzhan Akgun; David Bartolini; Boris Cournède
  3. The effects of a tax allowance for growth and investment: Empirical evidence from a firm-level analysis By Petutschnig, Matthias; Rünger, Silke
  4. You’ve got mail: A randomised Field experiment on tax evasion. By Bott, Kristina Maria; Cappelen, Alexander W.; Sørensen, Erik Ø.; Tungodden, Bertil

  1. By: Anna Milanez
    Abstract: This paper examines the role of businesses in the tax system. In addition to being taxed directly, businesses act as withholding agents and remitters of tax on behalf of others. Yet the share of tax revenue that businesses remit to governments outside of direct tax liabilities is under-studied. This paper develops two measures of the contribution of businesses to the tax system and applies both these measures for 24 OECD countries. The results show that businesses play an important role in the tax system, both as taxpayers and as remitters of tax. However, care should be taken in interpreting any measure of the business tax burden, which must be understood against the backdrop of economic incidence. This paper highlights that the economic incidence, or burden, of a tax is not necessarily borne by the person on whom the tax is imposed under legal statute, but may be passed on to others in the economy, whether it be owners of capital, workers or consumers.
    Date: 2017–09–18
  2. By: Oguzhan Akgun; David Bartolini; Boris Cournède
    Abstract: This paper investigates the factors that shape governments’ capacity to collect revenue. To do so, it analyses how tax revenue responds to tax rates using evidence from a panel of 34 OECD countries over 1978-2014. The estimations show that the response of revenue to rates weakens as rates become higher, confirming the existence of a hump-shaped relationship between tax revenue and rates for corporate income taxation and providing a new contribution by analysing value-added taxation. Importantly, the estimated responses of revenue to tax rates vary, in some cases very strongly from an economic perspective, depending on country-specific policies and framework conditions. In particular, the corporate income tax revenue-generating potential of hiking the effective rate shrinks much more quickly in more open economies than in more closed ones. Tax revenue is found to be more responsive to tax increases in countries where the tax authorities have more resources. The investigations also cover personal income taxation. They point to diminishing revenue returns of increasing the effective marginal tax rates that apply at substantially above-average income levels.
    Keywords: country-specific circumstances, effective marginal tax rate, framework conditions, interactions, Laffer curve, personal income tax, social security contributions, value added tax
    JEL: H20 H24 H26
    Date: 2017–09–11
  3. By: Petutschnig, Matthias; Rünger, Silke
    Abstract: We contribute to the empirical literature on the debt bias of corporate income taxation through a firm-level evaluation of the European Commission's recent proposal of an Allowance for Growth and Investment (AGI). We use the introduction, the application and the repeal of a similar allowance in Austria during the early 2000s to evaluate the effects of the AGI on corporate equity and profit distribution. Our analysis provides evidence that such an allowance could increase corporate equity ratios by 5.5 percentage points and reduce profit distributions by 7.6 percentage points. These effects are stronger than those the previous literature for traditional Allowance for Corporate Equity (ACE) tax systems has identified. Additionally, we contribute to the recently expanding literature on the influence of ownership on tax planning as we find significant differences in the utilization of the AGI depending on individual specifics of the majority shareholder as well as depending on the number of shareholders of the respective firms
    Keywords: taxes,retained earnings,tax allowance,notional interest deduction,AGI,ACE
    JEL: G32 H24 H25 K34
    Date: 2017
  4. By: Bott, Kristina Maria (Dept. of Economics, Norwegian School of Economics and Business Administration); Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Sørensen, Erik Ø. (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We report from a large-scale randomized field experiment conducted on a unique sample of more than 15 000 taxpayers in Norway, who were likely to have misreported their foreign income. We find that the inclusion of a moral appeal or a sentence that increases the perceived probability of detection in a letter from the tax authorities almost doubled the average self-reported foreign income. The moral letter mainly works on the intensive margin, while the detection letter mainly works on the extensive margin. We also show that the detection letter has large long-term effects on tax compliance.
    Keywords: Taxation; tax evasion; field Experiment.
    JEL: C93 D63 H26
    Date: 2017–06–11

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