nep-pub New Economics Papers
on Public Finance
Issue of 2018‒12‒03
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Better Route to Global Tax Coordination: Gradualism or Multilateralism? By Kai A. Konrad; Marcel Thum
  2. Why must it always be so Real with Tax Evasion? By Rangan Gupta; Philton Makena
  3. Inheritance Tax Regimes: A Comparison By Stefan Jestl
  4. Carbon tax in small open economies: an analysis on its economic efficiency By José María Martín-Moreno; Jorge Blázquiez; Rafaela Pérez; Jesús Ruiz
  5. Corporate Social Responsibility and Tax Avoidance By Laszlo Goerke
  6. Taxation of Savings and Portfolio Choices of French Households By Christian Pfister
  7. The Value Added Tax (VAT) analysis for Uganda By Lakuma, Corti Paul; Sserunjogi, Brian

  1. By: Kai A. Konrad; Marcel Thum
    Abstract: In the context of international tax coordination incomplete information is one of the well-known frictions that can lead to bargaining failure and might explain a lack of observed coordination. We consider international negotiations about tax coordination under complete and incomplete information. We identify the conditions for multilateral negotiations to be more likely to be successful than gradual/sequential negotiation approaches and compare different routes of sequential bargaining. Under plausible conditions, full-scale global coordination is least likely to emerge if the negotiations take place sequentially, and if the negotiations with the most unpredictable country take place last.
    Keywords: tax competition, tax cooperation, multilateral negotiations, sequential negotiations, ultimatum bargaining, acceptance uncertainty
    JEL: H25 H77 F52 F55
    Date: 2018
  2. By: Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Philton Makena (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: We provide an alternative theoretical explanation to the tax evasion-inflation relationship by endogenizing the discount factor in a standard overlapping generations endowment economy. When the discount factor is a positive function of non-productive public expenditure, then inflation is bound to increase seigniorage, leading to an increase in public expenditure. In consequence, old age consumption increases in importance such that tax evasion among young-age agents increases to enhance the interest income from savings.
    Date: 2018–11
  3. By: Stefan Jestl (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper provides an overview of different inheritance tax regimes in selected European countries and the United States. We identify that in the majority of countries the tax rate is related to the relationship between bequeathing party and the bequeathed as well as the value of the inherited assets. In most countries the transfer of wealth within families is treated preferentially (lower tax rates, tax exemptions and reliefs). This is particularly the case for business assets and family homes. This analysis further discusses the features and effects of inheritance tax regimes based on various criteria. These cover behavioural responses of individuals and different distributional effects of an inheritance tax. Furthermore, the amount of tax revenues varies considerably both between countries and over time. Although the actual revenues of inheritance taxation are quite low in the selected countries (ranging between 0.1% and 0.5% of GDP), some indicators point to higher revenue potentials in the future. Due to an increase in private wealth and its concentration over time, we can expect to observe an increase in inheritance tax revenues, even though countries allow a high tax-free allowance. An appropriate design of inheritance taxation could further help to foster economic growth and decelerate the increase in wealth inequality.
    Keywords: inheritance taxation, tax regimes, wealth inequality
    JEL: D31 H21
    Date: 2018–11
  4. By: José María Martín-Moreno (University of Vigo); Jorge Blázquiez (KARSARC); Rafaela Pérez (University Complutense of Madrid and ICAE); Jesús Ruiz (University Complutense of Madrid and ICAE)
    Abstract: The environmental objectives of the Paris Agreement imply that all policy levers will be eventually used to curb carbon emissions, including a carbon tax and specific taxes on fossil fuels. In this context, we identify the optimal tax-mix for oil, natural gas and coal in order to achieve a specific carbon emissions target for Spain, a competitive and small open economy. In a second step, we compare the optimal tax-mix to a standard carbon tax. This analysis is conducted in a general equilibrium framework. The results of the model suggest that: first, a carbon tax is suboptimal from a second-best point of view. In particular, carbon taxes are an unsatisfactory policy tool for mild environmental targets. Second, governments must always tax coal heavily to reduce CO2 emissions. In addition, subsidizing oil and natural gas could be part of an optimal strategy. This is a counterintuitive and innovative result. Third, we also find that the tax on oil should always be lower than both the tax on natural gas as well as the tax on coal. Fourth, marginal abatement costs of CO2 in terms of social welfare increases as the environmental policy becomes more ambitious. Finally, revenues from a carbon tax are higher than those arising from an optimal tax-mix, which could create a dilemma for policymakers.
    Keywords: carbon tax, CO2 emissions, environmental policy, fossil fuels, optimal taxes.
    JEL: C61 F41 H23
    Date: 2018–11
  5. By: Laszlo Goerke
    Abstract: We theoretically analyse the relationship between Corporate Social Responsibility (CSR) and tax avoidance of an oligopolistic firm. The firm maximises a weighted sum of profits and a CSR objective which depends on output and the firm's contribution to public good provision, i.e. tax payments. Making one CSR element more important induces the firm to adhere less to the other and to reduce tax avoidance. Hence, simultaneously a substitutive and a complementary relationship between CSR and tax avoidance can be observed. Therefore, employing composite indicators of CSR prevents an empirical identification of this linkage. Moreover, if tax avoidance declines, CSR activities will increase. Consequently, the overall link between CSR and tax avoidance is theoretically ambiguous.
    Keywords: corporate social responsibility, public good, oligopoly, output, tax avoidance
    JEL: H26 L13 L31 M14
    Date: 2018
  6. By: Christian Pfister
    Abstract: France is the European country in which, together with the United Kingdom, the taxation of saving is highest (6% of GDP in 2016, against on average 3.8% in the European Union and 3.5% in the euro area). This situation is evaluated with regard to the theoretical debate on optimal taxation. Although no clear-cut conclusion can be drawn from that debate, it appears that the “dual Nordic” is nowadays widely considered as satisfying. However, theoretical research tends to underestimate the genuine tax burden, as they do not take two factors into consideration, namely cumulated taxation and inflation. In fact, although taxation is only one the factors that influence the allocation of assets, it plays an important role in savers’ choices. As an illustration, an evaluation of the impact of the newly-created ‘prélèvement forfaitaire unique’ (single flat tax on saving income) is provided by Christian Pfister.
    Keywords: Taxation, Saving, Optimal Taxation, Asset Allocation.
    JEL: E62 G11 H21 H22 H3
    Date: 2018
  7. By: Lakuma, Corti Paul; Sserunjogi, Brian
    Abstract: Uganda’s public expenditure is growing at a fast rate due to the need to finance her National Development Plan (NDP) with the goal of attaining high middle income country status as envisioned in the Vision 2040. Consequently, Uganda’s stock of public debt, both domestic and external, to finance the NDP has increased significantly. This has been exacerbated by significant reduction in aid due to austerity measure taken to contain the impact of the 2009 international financial crisis that constrained fiscal space significantly. In this regard, Uganda has made commitments to step up its efforts to mobilise domestic resources to finance the NDP. Owing to its efficiency and effectiveness, the Value Added Tax (VAT) has been identified as one of the key tax head that could boost domestic resource mobilisation. However, the revenue productivity of Uganda’s VAT, as measured by its “C-efficiency”, is low when compared with other Sub-Saharan African countries. It is on this backdrop that this paper provides a comprehensive quantitative analysis of the gap between potential revenues and actual VAT collections, known as the compliance gap. This analysis generates evidence for Uganda Revenue Authority (URA) to monitor and identify what is contributing to its VAT gap. In addition, this paper estimates the policy gap. The policy gap refers to the impact on the potential yield of the tax due to exemptions, zero ratings, and other reductions to the potential tax base.
    Keywords: Consumer/Household Economics, Productivity Analysis, Risk and Uncertainty
    Date: 2018–10–30

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