nep-pub New Economics Papers
on Public Finance
Issue of 2019‒03‒25
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxation and the future of work: How tax systems influence choice of employment form By Anna Milanez; Barbara Bratta
  2. Nash Equilibrium in Tax and Public Investment Competition By Sharma, Ajay; Pal, Rupayan
  3. Progressive tax reforms in flat tax countries By Barrios, Salvador; Ivaškaitė-Tamošiūnė, Viginta; Maftei, Anamaria; Narazani, Edlira; Varga, Janos
  4. Effects of tax-benefit policy changes across the income distributions of the EU-28 countries: 2017-2018 By EUROMOD, EUROMOD
  5. The Political Economy of the Taxation of Individuals in North Cyprus By Amin Sokhanvar; Glenn P. Jenkins; Hasan Ulas Altiok

  1. By: Anna Milanez; Barbara Bratta
    Abstract: Recent policy discussion has highlighted the variety of ways in which the world of work is changing. One development prevalent in some countries has been an increase certain forms of non-standard work. Is this beneficial, representing increased flexibility in the workforce, or detrimental, representing a deterioration in job quality driven by automation, globalisation and the market power of large employers? These changes also raise crucial issues for tax systems. Differences in tax treatment across employment forms may create tax arbitrage opportunities. This paper investigates the potential for such opportunities for eight countries. It models the labour income taxation, inclusive of social contributions, of standard employees and then of self-employed workers (with applicable tax rules detailed in the paper’s annex). The aim is to understand whether countries’ tax systems treat different employment forms differently, before approaching the broader question of whether differential treatment has merit when evaluated against tax design principles.
    Keywords: future of work, gig economy, gig work, labour tax, labour taxation, non-standard work, self-employment, tax, taxation
    JEL: H2 H24 J2 J21 J08
    Date: 2019–03–21
  2. By: Sharma, Ajay; Pal, Rupayan
    Abstract: We analyze Nash equilibrium in fiscal competition with tax and public investment between symmetric regions. We show that given the opposite strategic nature of tax (strategic complement) and public investment (strategic substitute), there is possibility of multiple equilibria. We find that if strategic substitute effect dominates strategic complement effect, then both regions have first mover advantage in a timing game and simultaneous move Nash equilibrium (early, early) emerges; otherwise sequential move equilibria-(early, late) and (late, early) emerges. Also, sequential move Nash equilibria are Pareto improving than simultaneous move outcome. Lastly, race-to-the-bottom in taxes is restricted in sequential move equilibria.
    Keywords: Capital taxation; Public investment; Tax competition; Joint strategic substitutes; Joint strategic complements
    JEL: F21 H25 H41 H73 R5
    Date: 2019–03–12
  3. By: Barrios, Salvador; Ivaškaitė-Tamošiūnė, Viginta; Maftei, Anamaria; Narazani, Edlira; Varga, Janos
    Abstract: Much of the literature on flat tax reforms has highlighted the benefits of introducing flat personal income tax systems in transition economies. The advocated benefits of flat tax systems range from their simplicity, higher compliance and lower distortionary effects on growth and employment. These arguments have often been cited to support policy recommendations favouring the adoption of flat tax systems in Central and Eastern European (CEE) countries in the 1990s and the 2000s. However since income inequality is notoriously high in these countries, the question of introducing some progressivity in the tax system has come to the fore in both policy and academic circles. In this paper, we analyse the fiscal, redistributive and macroeconomic impact of (re-)introducing progressivity in a number of CEE countries with flat tax systems. Combining microsimulation and macro models, we find that a significant reduction in income inequality can be achieved by moving from a flat to a progressive tax system with positive, albeit negligible, macroeconomic and employment impact. The magnitude of these effects depends on country-specificities and tax system characteristics, due in particular to the existence of tax allowances and tax creditsÂ
    Date: 2019–03–07
    Date: 2019–03–15
  5. By: Amin Sokhanvar (Department of Economics, Eastern Mediterranean University, North Cyprus); Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus); Hasan Ulas Altiok (Department of Banking and Finance,Eastern Mediterranean University, North Cyprus)
    Abstract: The objective of this study is to undertake a diagnostic of the personal direct tax system and the charges that are levied for the funding of the social security and the provident fund in North Cyprus. This analysis was conducted using a data base that included 100% of the individual tax payers. Particular attention was given to the assessment of the marginal tax rates on labor income and how they might affect fiscal compliance. It was found that the design of the tax system and its interaction with the systems of social security and provident fund contributions have created a powerful set of incentives for non-compliance. Top income earning employees in the private sector face a very high combined marginal fiscal burden. As a consequence, massive tax avoidance takes place so that most private employees pay no marginal income tax, social security or provident fund contributions on income above the minimum wage. In addition, the private self-employed allocate their wage incomes so as to minimize the total burden of social security, provident fund contributions plus individual and corporate income tax payments of their businesses. These very high marginal rates at levels of income that are low (by developed country standards) have created informal administrative measures to alleviate the fiscal burden on individuals. The end result however, is neither equitable nor economically neutral.
    Keywords: Pensions funds, personal income tax, tax incidence, tax compliance, fiscal equity
    JEL: H24 H26
    Date: 2019–01

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