nep-pub New Economics Papers
on Public Finance
Issue of 2018‒03‒05
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal taxes on capital in the OLG model with uninsurable idiosyncratic income risk By Krueger, Dirk; Ludwig, Alexander
  2. Welfare-improving Consumption Tax in the Presence of Wage Tax under Idiosyncratic Returns from Investment and Incomplete Markets By Hisahiro Naito
  3. Politicians at higher levels of government are perceived as more corrupt By Abel François; Pierre-Guillaume Méon
  4. Public Private Partnerships: The Swiss Specificity By Athias, Laure; Macina, Moudo; Wicht, Pascal
  5. Tax corruption and private sector development in Vietnam By Nguyen, Ngoc Anh; Doan, Quang Hung; Tran-Nam, Binh
  6. Energy Tax Reform and Poverty Alleviation in Mexico By José M. Labeaga; Xavier Labandeira; Xiral López-Otero
  7. Taxing High Net Worth Individuals: Lessons from the Uganda Revenue Authority’s Experience By Kangave, Jalia; Nakato, Susan; Waiswa, Ronald; Nalukwago, Milly; Lumala Zzimbe, Patrick

  1. By: Krueger, Dirk; Ludwig, Alexander
    Abstract: We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1.
    Keywords: Idiosyncratic Risk,Taxation of Capital,Overlapping Generations,Precautionary Saving,Pecuniary Externality
    JEL: H21 H31 E21
    Date: 2018
  2. By: Hisahiro Naito
    Abstract: In a standard multi-period model, consumption tax and wage tax are equivalent. I show that when a capital market is incomplete---in the sense that the rates of return from risky investments are idiosyncratic and there is no insurance for such idiosyncratic risk---the introduction of consumption tax in the presence of wage tax improves welfare. This holds true even in the presence of optimal or non-optimal capital income taxes. In the general equilibrium model, the optimal level of consumption tax is determined to balance the benefits of the risk-sharing effect and asset accumulation effect and the costs of postponing government revenue to later periods.
    Date: 2018–02
  3. By: Abel François; Pierre-Guillaume Méon
    Abstract: Using an original survey where French citizens were asked to assess corruption at all levels of government, we observe that institutional distance increases perceived corruption. Specifically, municipal governments are perceived as the least corrupt, followed by local governments, senators, deputies, and the national cabinet. The president of the Republic is perceived as slightly less corrupt than the national cabinet, but more corrupt than any other level of government. The relation is robust to alternative specifications, controlling for a series of individual and regional characteristics, and to alternative definitions of the dependent variable. It is not reducible to geographical distance. We observe similar results in other countries.
    Keywords: Corruption; Levels of government; Decentralization; Federalism
    JEL: D72 D73 H11 H77 K42
    Date: 2018–02–22
  4. By: Athias, Laure; Macina, Moudo; Wicht, Pascal
    Abstract: While most countries have adopted public private partnerships, the prevalence of such arrangements differs widely across countries and the differences have been persistent. In particular, while around 700 PPP projects have been launched in the United Kingdom between 1994 and 2011, Switzerland has experienced only 2 of such arrangements over the same period of time, and exhibits one of the lowest number of PPPs within OECD countries. What could explain this Swiss specificity? Is this specificity a good or a bad thing? What is the right number of PPPs? The goal of this chapter is to answer these questions. To this aim, we first define precisely what PPPs are, and what they are not (Section 1). We then develop the theoretical framework that points out the conditions under which PPP arrangements are optimal, or relatively more optimal than the other possible modes of provision (Section 2). This normative analysis highlights that the choice to resort to PPPs should be driven by the characteristics of the public service considered. As we expect public services to be quite similar across countries of similar level of economic development, we can infer that it is only cultural and institutional differences that could help to explain the differences in actually implemented PPPs. We then consider the Swiss cultural and institutional specificities that might lead the number of PPPs to be under optimal in Switzerland but also over optimal in other countries (Section 3). Finally, we conclude with some policy recommendations.
    Keywords: Public private partnerships, Transaction costs, Switzerland, Culture, Institutions
    JEL: D23 H11 H44
    Date: 2017–12–17
  5. By: Nguyen, Ngoc Anh; Doan, Quang Hung; Tran-Nam, Binh
    Abstract: This article aims to examine the impact of tax corruption on private sector development in Vietnam. It is motivated by two separate but related considerations. First, despite the seriousness of the phenomenon of corruption, there is a paucity of rigorous empirical research of corruption, particularly tax corruption, in Vietnam. Secondly, ineffective control of corruption is viewed as a cause of Vietnam’s recent total factor productivity (TFP) slowdown or its poor industrial policy, both of which may hamper Vietnam’s progress as a low middle-income country. Without some understanding on the impact of tax corruption on the economy, it may not be possible to devise the most effective anti-corruption policy and measures. After a brief literature review that focuses on tax corruption, various conceptual issues relating to tax corruption are discussed and clarified. The extent of petty tax corruption in Vietnam is then discussed, followed by a review of findings and implications of recent studies on how tax corruption impacts on private sector development in Vietnam. Despite perceptions and evidence of widespread petty tax corruption, Vietnam ranks very highly both in terms of tax collection and tax effort.Not unexpectedly, the impact of tax corruption is mixed in the sense that empirical evidence lends credence to both 'sanding the wheels' and 'greasing the wheels' hypotheses. Finally, some broad policy recommendations for combating tax corruption are offered.
    Keywords: tax corruption, unofficial/informal payments, private sector, Vietnam
    JEL: H20 H26 H29
    Date: 2017–12
  6. By: José M. Labeaga; Xavier Labandeira; Xiral López-Otero
    Abstract: Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico’s recently implemented tax reforms in the energy domain, and of a hypothetical (partial) removal of existing electricity subsidies. Using the rich National Household Income and Expenditure Survey within the context of a demand system adjustment of non-durable goods, this article provides the publicrevenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidyremoval and distributive offsets.
    Keywords: Distribution; equity; emissions; subsidy
    JEL: D12 D31 H23 Q48
    Date: 2018–01
  7. By: Kangave, Jalia; Nakato, Susan; Waiswa, Ronald; Nalukwago, Milly; Lumala Zzimbe, Patrick
    Abstract: Low-income countries have, on average, reduced their reliance on foreign aid inthe past two decades. This has been achieved in part by collaborating with high-income countries and donor agencies to strengthen the capacity of tax authorities to collect revenue. While significant progress has been made, various revenue sources remain untapped. Many low-income countries continue to rely heavily on indirect taxes, such as Value Added Tax, and customs and excise duties. Income taxes contribute a very small percentage to total tax revenue, and are paid mainly by people in formal employment and large companies. It is estimated that on average, personal income taxes (PIT) contribute only 2 per cent of GDP in sub-Saharan Africa, which is low when compared to the 10 per cent collected in high-income countries.
    Keywords: Governance,
    Date: 2018

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