nep-pub New Economics Papers
on Public Finance
Issue of 2018‒08‒13
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Progressive Taxation of Extractive Resources as Second-Best Optimal Policy By Jean-François Wen
  2. Tax expenditure and the treatment of tax incentives for investment By Redonda, Agustin; Diaz de Sarralde, Santiago; Hallerberg, Mark; Johnson, Lise; Melamud, Ariel; Rozemberg, Ricardo; Schwab, Jakob; von Haldenwang, Christian
  3. Income inequality, redistributive preferences and the extent of redistribution : An empirical application of optimal tax approach By Tanninen Hannu; Tuomala Matti; Tuominen Elina
  4. Income Inequality and Economic Growth: A Re-Examination of Theory and Evidence By Mehmet Balcilar; Rangan Gupta; Wei Ma; Philton Makena
  5. The Tax-Efficient Use of Debt in Multinational Corporations By Jarle Møen; Dirk Schindler; Guttorm Schjelderup; Georg Wamser
  6. How Do Firms Respond to Place-Based Tax Incentives? By Hyejin Ku; Uta Schönberg; Ragnhild C. Schreiner
  7. Bringing Tax Avoiders to Light: Moral Framing and Shaming in a Public Goods Experiment By Tsikas, Stefanos A.; Wagener, Andreas
  8. Tax Morale and the Role of Social Norms and Reciprocity. Evidence from a Randomized Survey Experiment By Philipp Dörrenberg; Andreas Peichl
  9. Tax incidence and fiscal systems: some problems on tax compared history in XIX and XX centuries By José Alves

  1. By: Jean-François Wen
    Abstract: The paper provides a critical review of the literature on the concept of progressivity in the taxation of petroleum and mineral resources and offers a fresh perspective on its purpose and measurement. Regressive taxes, such as royalties, exist to satisfy policy objectives other than revenue maximization, such as achieving early revenues, while rent-based or profit-sensitive fiscal instruments must be designed with progressive marginal rates to maximize government revenues. Hence, the emphasis should be placed on tax rate progression of the direct taxation of profit or rent, rather than progressivity in the overall government take. However, as regressive taxes, by their very nature, tend to be distortionary, the optimal degree of progression in the rent- or profit-tax rates must take these distortions into account. The central ideas are illustrated with a simple analytical model in which a second-best optimal tax rate schedule on profit is characterized in the presence of the tax distortions caused by the regressive taxes. Some practical implications of the analysis are discussed.
    Keywords: Progressive taxation;Effective tax rate;Optimal taxation;Minerals;Petroleum;rent tax, average effective tax rate, second-best optimality, Business Taxes and Subsidies, General
    Date: 2018–06–13
  2. By: Redonda, Agustin; Diaz de Sarralde, Santiago; Hallerberg, Mark; Johnson, Lise; Melamud, Ariel; Rozemberg, Ricardo; Schwab, Jakob; von Haldenwang, Christian
    Abstract: Governments use tax expenditures to boost investment, innovation and employment. However, these schemes are largely opaque, costly and often ineffective in reaching their stated goals. They also frequently trigger unwanted side effects. In order to improve the performance of these tools, the authors present three concrete policy proposals: First, governments should increase transparency on tax benefits. G20 members should take the lead on this with frequent and comprehensive tax expenditure reports. Second, G20 governments should improve the design of tax incentives with the aim of minimizing the generation of windfall profits and negative spillover effects within and across (in particular, on poorer) countries. Third, governments should phase out tax expenditures that are environmentally harmful, including tax incentives for fossil fuels and other schemes that promote an unsustainable use of natural resources.
    Keywords: tax expenditure,tax competition,investment,fossil fuel subsidies
    JEL: H2 H87 N4
    Date: 2018
  3. By: Tanninen Hannu; Tuomala Matti; Tuominen Elina (Faculty of Management, University of Tampere)
    Abstract: We examine empirically the relationship between the extent of redistribution and the components of the Mirrlees framework, with a focus on inherent inequality and government’s redistributive preferences. We have constructed our income distribution variables from the Luxembourg Income Study (LIS) database, which provides information on both factor and disposable incomes. Our redistributive preference measure is constructed using the optimal tax formula for which we have collected data from various sources. In addition to traditional linear specifications, we use flexible methods to allow nonlinearities because pre-specified functional forms are not easy to justify in empirical investigations of the optimal tax framework. We study 14 advanced countries for approximately four decades and find support for the Mirrlees model: There is a positive relationship between factor-income inequality and the extent of redistribution. We also find a link between our redistributive-preference measure and the extent of redistribution.
    Keywords: : income inequality, nonlinearity, preferences, redistribution
    JEL: C14 D31 H3
    Date: 2018–07
  4. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey; Department of Economics, University of Pretoria, Pretoria, South Africa; Montpellier Business School, Montpellier, France.); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Wei Ma (International Business School Suzhou, Xi'an Jiaotong-Liverpool University, Suzhou, China); Philton Makena (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: We re-examine the theoretical and empirical relationship between income inequality and economic growth in an endogenous growth model with a at tax on income, distributive conflicts among agents and median voter dynamics. We show that when government spends tax revenue on the provision of public goods in the form of both production and consumption services, the theoretical relationship between inequality and economic growth is neither strictly positive nor strictly negative but that it is ambiguous. An empirical evaluation of the theoretical findings is done by applying a semi-parametric model on a sample of 55 low-income, lower-middle-income, upper-middle-income and high-income countries for the period 1980 to 2010. Results show that the relationship between income inequality and growth takes the form of an inverted-U shape in that income inequality initially has a positive impact on growth up to an average Gini coefficient threshold of 35.92 beyond which it negatively impacts on growth.
    Date: 2018–07
  5. By: Jarle Møen; Dirk Schindler; Guttorm Schjelderup; Georg Wamser
    Abstract: Some multinationals use the parent company as a lender to the group, whereas others set up an internal bank in a low tax jurisdiction. This paper discusses the link between capital structure choices and tax planning motives in multinational groups. We model the trade-off between the use of external debt, parental debt and an internal bank. We test the theory model using data on the universe of German multinationals. The empirical analysis largely supports our model in that: (i) smaller firms often rely on parental debt financing; (ii) larger multinationals are more likely to use internal banks; (iii) parental debt and external debt are substitutes and the mix depends on the relative cost of raising capital through the parent and the affiliates; (iv) both parental debt and external debt increase when the tax rate increases, all else equal.
    Keywords: corporate taxation, multinationals, capital structure, international debt-shifting, parental debt
    JEL: H25 G32 F23
    Date: 2018
  6. By: Hyejin Ku (University College London, Department of Economics and CReAM); Uta Schönberg (University College London, Department of Economics, CReAM, and Institute for Employment Research (IAB)); Ragnhild C. Schreiner (University College London, Department of Economics, CReAM, and Ragnar Frisch Centre for Economic Research)
    Abstract: In this paper, we evaluate the effects of payroll tax changes on firm behavior, by exploiting a unique policy setting in Norway, where a system of geographically differentiated payroll taxes was suddenly abolished due to an EU regulation. We find that firms are only partially able to shift the increased costs from higher payroll tax rates onto workers’ wages. Instead, firms respond to the tax increase primarily by reducing employment. The drop in employment following the tax reform is particularly pronounced in labor intensive firms—which experience a larger windfall loss due to the tax reform than non-labor intensive firms—and in multi-establishment firms—which respond to the payroll tax increase in part by reducing the number of establishments per firm. Overall, our findings point to liquidity effects whereby a sudden and largely unexpected payroll tax increase aggravates firms’ liquidity constraints, forcing them to cut employment to bring down costs.
    Keywords: Payroll taxes, regional tax incentive, firm behavior, labor demand
    JEL: D22 H25 H32 J18 J23
    Date: 2018–08
  7. By: Tsikas, Stefanos A.; Wagener, Andreas
    Abstract: With a series of public goods games in a 2x2-design, we analyze two channels that might moderate social dilemmas and increase cooperation without using pecuniary incentives: moral framing and shaming. Cooperation increases when non-contributing to a public good is framed as morally debatable and socially harmful tax avoidance. However, cooperation is only durable when free-riders are "shamed" by disclosing their misdemeanor. We find shaming effects to be strong enough to make appeals to morality redundant for participants' decisions.
    Keywords: shaming; framing; tax avoidance; public goods experiment
    JEL: E62 H26 H30
    Date: 2018–07
  8. By: Philipp Dörrenberg; Andreas Peichl
    Abstract: We present the first randomized survey experiment in the context of tax compliance to assess the role of social norms and reciprocity for intrinsic tax morale. We find that participants in a social-norm treatment have lower tax morale relative to a control group while participants in a reciprocity treatment have significantly higher tax morale than those in the social-norm group. This suggests that a potential backfire effect of social norms is outweighed if the consequences of violating the social norm are made salient. We further document the anatomy of intrinsic motivations for tax compliance and present first evidence that previously found gender effects in tax morale are not driven by differences in risk preferences.
    Keywords: tax compliance, tax evasion, intrinsic motivations, tax morale, social norms, reciprocity
    JEL: H20 H32 H50 C93
    Date: 2018
  9. By: José Alves
    Abstract: The study of tax systems have been deeply discussed regarding the early modern period. However, there is a lack of comparative historical studies about the last two centuries in what respect the tax state developments. In our article we analyse the tax history of the last two hundred years for five countries, intending to analyse the mechanisms levied by the different governments to efficiently collect more revenues and the power to coerce several economic agents as well as we reflect about the power of those agents to condition the tax political policies
    Keywords: Tax history; Tax developments; Fiscal systems; State building
    Date: 2018–07

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