nep-pub New Economics Papers
on Public Finance
Issue of 2018‒04‒09
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Costs of Corporate Tax Complexity By Eric Zwick
  2. Tax Evasion, Embezzlement and Public Good Provision By Chowdhury Mohammad Sakib Anwar; Alexander Matros; Sonali Sen Gupta
  3. Individual Differences and Contribution Sequences in Threshold Public Goods By Schüssler, Katharina; Schüssler, Michael; Mühlbauer, Daniel
  4. Paternalistic Taxation of Unhealthy Food and the Intensive versus Extensive Margin of Obesity By Zarko Kalamov; Marco Runkel
  5. The Bedroom Tax By Stephen Gibbons; Olmo Silva; Maria Sánchez-Vidal
  6. Heterogeneity in the tax pass-through to spirit retail prices: Evidence from Belgium By HINDRIKS Jean; SERSE Valerio
  7. Subnational Value Added Tax in Ethiopia and Implications for States’ Fiscal Capacity By Krever, Richard; Wollela, Abehodie Yesegat

  1. By: Eric Zwick
    Abstract: Does tax code complexity alter corporate behavior? This paper investigates this question by focusing on the decision to claim refunds for tax losses. In a sample of 1.2M observations from the population of corporate tax returns, only 37% of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, which motivates an investigation of how tax complexity alters this calculation. A research design exploiting tax preparer switches, deaths, and relocations shows that sophisticated preparers increase the claiming behavior of small and mid-market firms. Tax complexity decreases take-up among large firms through interactions of refund claims with other tax code provisions and with the audit process.
    JEL: D22 D92 E62 H2 H25 H3
    Date: 2018–03
  2. By: Chowdhury Mohammad Sakib Anwar; Alexander Matros; Sonali Sen Gupta
    Abstract: This paper presents a model that links tax evasion, embezzlement, and the public good provision and suggests how they are interrelated. We characterize the conditions for three types of Nash equilibria: tax evasion, embezzlement, and efficient public good provision.
    Keywords: Tax evasion, Embezzlement, Corruption, Audits, Sanctions, Public goods
    JEL: H40 D83 D73
    Date: 2018
  3. By: Schüssler, Katharina (LMU Munich); Schüssler, Michael (LMU Munich); Mühlbauer, Daniel (function(HR))
    Abstract: Following the notion that organizations often face public good dilemmas when collective action is needed, we use a real-time provision-point mechanism to experimentally explore the process of achieving cooperative equilibria. Specifically, besides exploring group outcomes, we identify individual antecedents for the timing of the contribution to the public good. In addition, we study the role of different situational factors for sustaining high rates of cooperation: information about others\' actions and the number of individuals necessary for public good provision. We find that contribution and implementation rates are relatively high, with only a moderate decline over time, and that social value orientation as well as several personality traits help to explain the observed contribution sequences.
    Keywords: provision-point mechanism; real-time protocol; personality traits;
    JEL: C92 D70 H41
    Date: 2018–03–26
  4. By: Zarko Kalamov; Marco Runkel
    Abstract: This paper shows that if an individual’s health costs are U-shaped in weight with a minimum at some healthy weight level and if the individual has both self control problems and rational motives for over- or underweight, the optimal paternalistic tax on unhealthy food mitigates the individual’s weight problem (intensive margin), but does not induce the individual to choose healthy weight (extensive margin). Implementing healthy weight requires a further distortion (e.g. subsidy on other goods), which may render the tax on unhealthy food inferior to the option of not taxing the individual at all. In addition, with heterogeneous individuals the optimal uniform paternalistic tax may have the negative side effect of rendering otherwise healthy individuals underweight.
    Keywords: sin tax, paternalism, obesity, extensive versus intensive margin
    JEL: D03 D11 H21 I18
    Date: 2018
  5. By: Stephen Gibbons; Olmo Silva; Maria Sánchez-Vidal
    Abstract: Housing subsidies for low income households are a central pillar of many welfare systems, but an expensive one. This paper investigates the consequences of an unusual policy aimed at reducing the burden of these subsidies by rationing tenants' use of space. Specifically, we study a policy introduced by the UK Government in 2013 which substantially cut housing benefits for tenants deemed to have a 'spare' bedroom - based on specific criteria related to household composition. Our study is the first to evaluate the impacts of the policy on its target group considering a range of outcomes. To do so, we use a difference-in-difference methodology that compares the observed behaviour of the treated households relative to a control group determined from the details of the policy rules. We find that - as expected - the treated group experienced losses to housing benefit and overall income. Although the policy was not successful in encouraging residential moves, it did incentivise people who moved to downsize - suggesting some success in terms of one of the policy goals, namely reducing 'under-occupancy' in the long run. We find no statistically significant effects on households' food consumption, savings or employment outcomes, despite the associated income reductions. Finally, we find some evidence of a reduction in self-reported satisfaction though this effect is not precisely estimated.
    Keywords: social housing, social rents, bedroom tax. Housing benefits
    JEL: H55 H2 R21 R28
    Date: 2018–04
  6. By: HINDRIKS Jean (CORE, Université catholique de Louvain); SERSE Valerio (CORE, Université catholique de Louvain)
    Abstract: On 1st November 2015, the Belgian government increased the excise tax on alcoholic beverages. For spirits with 40% of alcohol and bottle size of 70cl, this tax change is equivalent to an amount of 2,43€ per bottle of spirits. This paper studies the impact of this tax reform on the retail price of six major brands of spirits, using a difference-in-differences method. The estimation is based on a balanced panel of scanner data from a major supermarket chain and uses the retail prices of the same brands sold in France by the same supermarket chain as a control group. Having information on each store geographical location, we can further test for heterogeneity in tax pass-through according to the intensity of local competition and the scope for cross-border shopping. We find that the tax was quickly passed through spirit retail prices already during the first month of tax implementation and that it was mostly over-shifted. Unlike the (nearly) uniform pricing in US retail chains, we show spatial variation in prices across stores, and we find a large heterogeneity in tax pass-through linked to variation in local competition and price elasticity of demand. Although the tax reform has considerably increased the relative price of Belgian spirits with respect to all its neighboring countries, we find a lower tax shifting only in stores bordering on Luxembourg. Which is the neighboring country with the lowest spirit prices before the alcohol tax reform. These findings have important implications for alcohol control policies as they highlight the risk that the health benefits of alcohol taxation can vary greatly across households according to where they live.
    Keywords: tax pass through, scanner data, competition, cross border shopping
    JEL: H2 H22 H32 H71 I18
    Date: 2018–03–21
  7. By: Krever, Richard; Wollela, Abehodie Yesegat
    Abstract: In most federal systems, state governments are funded through a combination of direct fiscal transfers from the central government, and the revenue they collect directly from locally adopted taxes. Ethiopia is a federal polity, but follows a slightly different path in the case of its most important tax source – value added tax (VAT). As is the case in many developing countries, VAT is a major source of government revenue in Ethiopia, and the tax is levied under central government legislation. However, unlike the more common practice of a central government collecting VAT and then earmarking some of the revenue for transfer to states, collection rights and administration powers over VAT imposed on a portion of the economy in Ethiopia are assigned directly to state governments. The result is a fiscal relationship between central and state governments in Ethiopia that is distinctive in three main respects.
    Keywords: Governance,
    Date: 2018

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