nep-pub New Economics Papers
on Public Finance
Issue of 2018‒01‒15
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Corporate tax incidence and its implications for the labor market By Olena, Sokolovska
  2. How well targeted are soda taxes? By Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
  3. Estimating the Revenue Impacts of Tax Harmonisation By Ayoki, Milton
  4. Tax Simplicity and Heterogeneous Learning By Aghion, Philippe; Akcigit, Ufuk; Lequien, Matthieu; Stantcheva, Stefanie
  5. Market Power and Instrument Choice in Climate Policy By Mbéa Bell; Sylvain Dessy
  6. Tax Havens, Accounting Experts, and Fee-Setting Rules By Thomas A. Gresik; Kai A. Konrad
  7. Taxation, redistribution and observability in social dilemmas By Daniel Brent; Lata Gangadharan; Anca Mihut; Marie Villeval
  8. The Case for NIT+FT in Europe: An Empirical Optimal Taxation Exercise By Islam, Nizamul; Colombino, Ugo
  9. How Short Sales Circumvent the Capital Gains Tax System By Russell Stanley Q. Geronimo
  10. Public finances under plurality and proportional electoral systems. Evidence from Hungarian municipalities By GREGOR Andras

  1. By: Olena, Sokolovska
    Abstract: The paper investigates the relationship between corporate taxation and labor market indicators. This research supports the idea that the increase in corporate income tax rates in the open economy will lead to the capital outflow to the low-tax jurisdictions, resulting in tax incidence on labor with consequent decrease in labor productivity. An empirical analysis demonstrated the negative relationship between labor freedom index and corporate tax rate. In countries with higher GDP per capita the strength of such relationship differs from countries where GDP per capita is relatively low. In terms of corporate tax incidence, this means that in developed countries the corporate tax burden is shifted onto workers in lesser extent compared with developing and emerging economies. The estimation of specific elements of labor freedom index allowed to identify main tendencies of impact of change of the corporate income tax rate on certain labor market indicators in countries with different GDP per capita. We suggested that corporate tax incidence diversely affects the labor productivity in countries with different GDP per capita, and the direction of such impact is determined by composition of labor force and openness of economy.
    Keywords: corporate income tax, labor, tax burden, tax incidence, comparative analysis, labor productivity
    JEL: C10 E1 E10 E24 H22 H25 O57
    Date: 2017–12
  2. By: Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
    Abstract: Soda taxes aim to reduce excessive sugar consumption. Their effectiveness depends on whether they target individuals for whom the harm of consumption is largest. We estimate demand and account for supply-side equilibrium pass-through. We exploit longitudinal data to estimate individual preferences, which allows exible heterogeneity that we relate to a wide array of individual characteristics. We show that soda taxes are effective at targeting young consumers but not individuals with high total dietary sugar; they impose the highest monetary cost on poorer individuals, but are unlikely to be strongly regressive if we account for averted future costs from over consumption.
    Keywords: preference heterogeneity; discrete choice demand; pass-through; soda tax
    JEL: D12 H31 I18
    Date: 2017–12
  3. By: Ayoki, Milton
    Abstract: This paper reviews studies that attempt to measure empirically, revenue gains from tax harmonisation. Three groups of studies emerge, those that use cross-country regression, partial equilibrium analysis, and applied general-equilibrium (CGE) models—they all suggest (explicitly or implicitly) that the relationship between tax rates and tax revenues is ambiguous. In some special circumstances, there are gains that can be realized from tax harmonization, but those gains are usually modest in scope. Tax harmonization tends to disadvantage certain countries especially when the participating countries are different in size, and disparities in their initial tax structures are wide.
    Keywords: Policy Coordination, Tax Harmonisation, Tax Revenue, Computable General Equilibrium Models, Social Accounting Matrix.
    JEL: C18 C68 D78 F13 F15 H20 H23 H87
    Date: 2017–12–31
  4. By: Aghion, Philippe; Akcigit, Ufuk; Lequien, Matthieu; Stantcheva, Stefanie
    Abstract: We study how strongly individuals respond to tax simplicity and how they learn about the complexities of the tax system. We focus on the self-employed, who can more easily adjust to tax incentives and whose responses directly stem from their own understanding of the tax system. We use new French tax returns data from 1994 to 2012. France serves as a good quasi-laboratory: it has three fiscal regimes -- or modes of taxation-- for the self-employed, which differ in their monetary tax incentives and in their tax simplicity. Two key features are that, first, these regimes are subject to eligibility thresholds; we find large excess masses (bunching) right below the latter. Second, the regimes impact different agents heterogeneously and have changed extensively over time. Taken together, these two key elements give us measures of tax responses (the bunching) as well as the variation needed to jointly estimate a value of tax simplicity and taxable income elasticities. They also give us an opportunity to study how individuals learn about and respond over time to changing policy parameters. We estimate a large value for tax simplicity of up to 650 euros per year per individual depending on the regime and activity. We also find sizable costs of tax complexity; agents are not immediately able to understand what the right regime choice is, leave significant money on the table, and learn over time. The cost of complexity is ``regressive'' in that it affects mostly the uneducated, low income, and low skill agents. Agents who can be viewed as more informed and knowledgable (e.g., the more educated or high-skilled) are more likely to make the correct regime choice and to learn faster.
    Keywords: Complexity; entrepreneurship; learning; Self-employment; taxation
    JEL: H21
    Date: 2017–11
  5. By: Mbéa Bell; Sylvain Dessy
    Abstract: This paper compares a clean energy standard (CES) and a carbon tax (CT), using theory and quantitative experiments. A two-stage duopolistic competition in the electricity sector between a polluting plant and its non-polluting rival anchors the model underlying these experiments. The CT induces both plants to contribute to clean electricity, whereas the CES only incentivizes the non-polluting plant. Ultimately, what matters for the ranking of these instruments is the size of the pre-existing competitive gap between the two rival plants. When this gap is sufficiently small, the CES becomes the more cost-effective instrument, irrespective of the pre-specified emissions reduction target.
    Keywords: Electricity, Cost-effectiveness, Duopoly, Innovation, Quantitative analysis.
    JEL: H20 H32 L13 L51
    Date: 2017
  6. By: Thomas A. Gresik; Kai A. Konrad
    Abstract: Tax havens differ in the specific tax planning arrangements multinational firms can use to reduce their tax liabilities. Given the complexity and cost associated with identifying the most effective tax haven to use, an accounting firm can act as an intermediary between tax havens and multinational corporations. We analyze a model with horizontally differentiated multinationals and tax havens to study the role accounting firm intermediation has on tax haven prices, multinational tax planning choices, accounting firm profits, and tax revenues. In equilibrium, uniform accounting firm fees generate higher accounting firm profit, less tax avoidance, and higher tax revenues than either full price discrimination or haven-specific fees.
    Keywords: tax haven, accounting firm, horizontal differentiation, double marginalization, fee-setting rules
    JEL: M41 H26 H73
    Date: 2017
  7. By: Daniel Brent (LSU - Louisiana State University - Louisiana State University [Baton Rouge]); Lata Gangadharan (Department of Economics and Business - Monash University); Anca Mihut (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
    Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
    Date: 2017–10–04
  8. By: Islam, Nizamul (LISER (CEPS/INSTEAD)); Colombino, Ugo (University of Turin)
    Abstract: We present an exercise in empirical optimal taxation for European countries from three areas: Southern, Central and Northern Europe. For each country, we estimate a microeconometric model of labour supply for both couples and singles. A procedure that simulates the households' choices under given tax-transfer rules is then embedded in a constrained optimization program in order to identify optimal rules under the public budget constraint. The optimality criterion is the class of Kolm's social welfare function. The tax-transfer rules considered as candidates are members of a class that includes as special cases various versions of the Negative Income Tax: Conditional Basis Income, Unconditional Basic Income, In-Work Benefits and General Negative Income Tax, combined with a Flat Tax above the ex-emption level. The analysis show that the General Negative Income Tax strictly dominates the other rules, including the current ones. In most cases the Unconditional Basic Income policy is better than the Conditional Basic Income policy. Conditional Basic Income policy may lead to a significant reduction in labour supply and poverty-trap effects. In-Work-Benefit policy in most cases is strictly dominated by the General Negative Income Tax and Unconditional Basic Income.
    Keywords: optimal tax, negative income tax, basic income, micro-simulation, welfare
    JEL: H21 C18
    Date: 2017–11
  9. By: Russell Stanley Q. Geronimo
    Abstract: Through a short sale, a person borrows a share of stock from a lender, sells the borrowed share to a third person at the current price, and purchases an identical share in the market at a future date and at a future price to replace the borrowed share of stock. This only makes sense if the short seller anticipates a downward trend in share price. The short seller incurs a gain if share price decreases because the cost of replacing the borrowed share falls below the selling price. The reverse is true in an ordinary sale, where a person owning a share of stock incurs a loss if price decreases because the selling price falls below the basis or acquisition cost. Therefore, when a taxpayer simultaneously owns a share of stock and short sells an identical stock, any gain in an ordinary sale of the owned stock is offset by a corresponding loss in the short sale of the borrowed identical stock, vice versa. This offsetting effect, in turn, creates an unexpected tax deferral opportunity abused in other jurisdictions and which remains unregulated in the Philippine tax system.
    Date: 2017–12
  10. By: GREGOR Andras (CORE, Université catholique de Louvain)
    Abstract: In this paper I provide evidence on e ects of plurality and proportional electoral systems on fiscal outcomes. In Hungary di erent voting regimes are applied to elect the members of local councils: in places where more than 10,000 people live a variant of
    Keywords: public finances, plurality vs. proportional system
    JEL: H72 H77 D72 D78
    Date: 2017–11–06

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