nep-pub New Economics Papers
on Public Finance
Issue of 2017‒09‒17
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On the Marginal Excess Burden of Taxation in an Overlapping Generations Model By Chung Tran; Sebastian Wende
  2. The elasticity of taxable income: A meta-regression analysis By Neisser, Carina
  3. The Laffer curve for high incomes By Jacob Lundberg
  4. The Credibility of Commitment and Optimal Nonlinear Savings Taxation By Jang-Ting Guo; Alan Krause
  5. Tax Evasion and Inequality By Annette Alstadsæter; Niels Johannesen; Gabriel Zucman
  6. Banks in Tax Havens: First Evidence based on Country-by-Country Reporting By Vincent Bouvatier; Gunther Capelle-Blancard; Anne-Laure Delatte
  7. Dynamics of the British Multinational Enterprises and International Tax Regulation, 1914?1945 By Ryo Izawa
  8. Determinants of Registration of Unincorporated Enterprises under State Value Added Tax Act in India By Mukherjee, Sacchidananda; Rao, R. Kavita

  1. By: Chung Tran; Sebastian Wende
    Abstract: We quantify marginal excess burden, defined as the change in deadweight loss for an additional dollar of tax revenue, for different taxes. We use a dynamic general equilibrium, overlapping generations model featured with heterogeneous agents and a realistic structure of corporate finance and taxes. Our main results, based on an economy calibrated to Australian data, indicate that company taxes are more distorting than personal income and consumption taxes. Specifically, the marginal excess burden for the company income tax is 83 cents per dollar of tax revenue raised, compared to 34 cents and 24 cents for the personal income and consumption taxes, respectively. A broader analysis of more tax instruments confrim that the relatively larger excess burden of company taxes ultimately falls on households. Importantly, the marginal excess burden is distributed unevenly across skill types, generations and ages. This highlights political challenges when obtaining popular support for raising taxes. Hence, our analysis demonstrates that marginal excess burden can be an useful tool for evaluating both eciency and distributional implications of a tax increase at the margin.
    Keywords: Taxation, scal distortion, overlapping generations, skill hetero-geneity, corporate nance, deadweight loss, dynamic general equilibrium, welfare
    JEL: E62 H21 H22 H24 H25
    Date: 2017–09
  2. By: Neisser, Carina
    Abstract: The elasticities of taxable (ETI) and broad income (EBI) are key parameters in optimal tax and welfare analysis. To examine the large variation in estimates found in the literature, I conduct a comprehensive meta-regression analysis of elasticities that measure behavioral responses to income taxation using information from 51 different studies containing 1,420 estimates. I find that heterogeneity in reported estimates is driven by regression techniques, sample restrictions and variations across countries and time. Moreover, I provide descriptive evidence of the correlation between contextual factors and the magnitude of an elasticity estimate. Overall, the study confirms the fact that the ETI itself is endogenous to the underlying tax system. I also document that selective reporting bias is prevalent in the literature. The direction of reporting bias depends on whether or not deductions are included in the tax base.
    Keywords: elasticity of taxable income,income tax,behavioral response,meta-regression analysis
    JEL: C81 H24 H26
    Date: 2017
  3. By: Jacob Lundberg
    Abstract: An expression for the Laffer curve for high incomes is derived, assuming a constant Pareto parameter and elasticity of taxable income. The peak of this Laffer curve is given by the well-known Saez (2001) expression. Microsimulations using Swedish population data show that the simulated curve matches the theoretically derived Laffer curve well, suggesting that the analytical expression is not too much of a simplification. Policy conclusions do not change much when income effects are taken into account. A country-level dataset of top effective marginal tax rates and Pareto parameters is assembled. This is used to draw Laffer curves for 27 OECD countries. Revenue-maximizing tax rates and degrees of self-financing for a small tax cut are also computed. The results indicate that degrees of self-financing range between 28 and 195 percent. Five countries have higher tax rates than the peak of the Laffer curve.
    Date: 2017–08
  4. By: Jang-Ting Guo; Alan Krause
    Abstract: Abstract: We compare optimal nonlinear savings taxation under different assumptions with regard to the government's ability to commit to its future tax policy. In particular, we incorporate the possibility that individuals may differ in their beliefs regarding the probability of commitment. When these beliefs are homogeneous, we find that optimal marginal savings tax rates always fall between those under the polar cases of full-commitment (zero marginal savings taxation) and no-commitment (progressive marginal savings taxation). However, this result no longer holds when beliefs are postulated to be heterogeneous. The effects of beliefs changing in response to past commitment or no-commitment decisions by the government are also quantitatively explored.
    Keywords: Savings taxation, commitment, multi-dimendional screening
    JEL: E69 H21 H24
    Date: 2017–09
  5. By: Annette Alstadsæter; Niels Johannesen; Gabriel Zucman
    Abstract: This paper attempts to estimate the size and distribution of tax evasion in rich countries. We combine random audits—the key source used to study tax evasion so far—with new micro-data leaked from large offshore financial institutions—HSBC Switzerland (“Swiss leaks”) and Mossack Fonseca (“Panama Papers”)—matched to population-wide wealth records in Norway, Sweden, and Denmark. We find that tax evasion rises sharply with wealth, a phenomenon random audits fail to capture. On average about 3% of personal taxes are evaded in Scandinavia, but this figure rises to close to 30% in the top 0.01% of the wealth distribution, a group that includes households with more than $45 million in net wealth. A simple model of the supply of tax evasion services can explain why evasion rises steeply with wealth. Taking tax evasion into account increases the rise in inequality seen in tax data since the 1970s markedly, highlighting the need to move beyond tax data to capture income and wealth at the top, even in countries where tax compliance is generally high. We also find that after reducing tax evasion—by using tax amnesties—tax evaders do not legally avoid taxes more. This result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the very wealthy.
    JEL: E21 H26
    Date: 2017–09
  6. By: Vincent Bouvatier; Gunther Capelle-Blancard; Anne-Laure Delatte
    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) Tax havens attract large extra banking activity beyond the regular gravity factors (+168% according to our estimates); 2) For EU banks, the main tax havens are located within Europe: Luxembourg, Isle of Man and Guernsey rank at the top of the foreign affiliates; 3) Attractive low tax rates are not sufficient to drive extra activity; 4) High quality of governance is not a driver, but banks avoid countries with weakest governance; 5) Banks also avoid the most opaque countries; 6) The tax savings for EU banks is estimated between €1 billion and €3.6 billion, i.e. 5 and 20% of fiscal revenues.
    Keywords: Tax evasion;International banking;Tax havens;Country-by-country reporting
    JEL: F23 G21 H22 H32
    Date: 2017–09
  7. By: Ryo Izawa (Faculty of Economics, Shiga University)
    Abstract: This study explores dynamics between formation of a tax system and its adaptation by enterprises over a period of time. In particular, the study examines the formation process of the British international tax system, focusing on business interest groups f political activities and British multinational enterprises f behaviour from 1914 to 1945. It is clarified that some business interest groups highly influenced the British international tax system. Political activities contributed to legislating Dominion Income Tax Relief in 1920 and concluding the UK?US tax treaty in 1945. However, the British government did not always welcome business interest groups f political activities. Inland Revenue and the Treasury were particularly reluctant to reduce tax revenue. Additionally, the governmental body always endeavoured to minimise tax relief fs scope. In such a tax environment, British multinational enterprises changed corporate structures, locations, and/or domiciles in some cases. Furthermore, the British overseas engaged in tax planning, identical to contemporary multinationals f tax planning.
    Keywords: Taxation history, International taxation, Business interest group, International business, Corporate political activity
    Date: 2017–08
  8. By: Mukherjee, Sacchidananda; Rao, R. Kavita
    Abstract: Unincorporated enterprises often bypass formal regulations in general and taxation in particular. Bringing unincorporated enterprises under taxation system is a challenge often faced by tax administrators and it is in this regard the present study explores the factors which influence decision of unincorporated enterprises to get registered with State Value Added Tax (VAT)/ sales tax authority. This analysis is limited to the decision regarding registration. It is not necessary that enterprises which are registered will pay taxes and/or file return- however; the process of registration does provide some information to the tax department for follow up. The study throws up some interesting results for policy makers and tax administrators.
    Keywords: Tax Registration, Unincorporated Enterprises, Informality, Value Added Tax (VAT), Partnership Firms, Proprietary Enterprises, Probit Model, India.
    JEL: H25 H26 H32 L53
    Date: 2017–09–08

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