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on Public Finance |
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Issue of 2019‒09‒16
nine papers chosen by |
| By: | Gilda Almeida (University of Miami Law School, J.D. Candidate) |
| Abstract: | Countries heavily rely on tax revenue for their welfare programs, which aim to reduce inequalities. Taxes are countries’ main sources of revenue and provide funding for governmental expenditures. A country’s spending is usually divided into categories: mandatory, discretionary, and interest on debt expenditures. These include assistance programs, such as the United States’ Medicaid program, the Supplemental Nutrition Program (so-called foods stamps), and the Temporary Assistance for Needy Families program. The United States lowered its U.S. corporate income tax rate from 35% to 21% in 2018, after the enactment of the United States Tax Cuts and Jobs Act. Similarly, members of the Organization for Economic and Co-operation and Development (OECD) lowered their corporate statutory tax from their 2000 average rate of 28.6% to 21.4% in 2018. In the international context, state-to-state tax arbitration is implemented by OECD members to provide multinationals with double tax relief. In contrast, individuals do not benefit from a similar tax reduction. The United States’ highest marginal income tax rate was reduced from 39.60% to 37% in 2018, whereas 0.5% was the average reduction implemented for individuals by OECD members from 2000 to 2017. This paper analyzes whether states expect private corporations to undertake more social responsibility when considering tax benefits. States’ examination of corporates’ social responsibility includes whether private social accountabilities align with corporations’ profit-oriented natures as well as state interest in public welfare. Furthermore, this paper examines states’ alternative sources of revenues that could balance out the effects of the reduction of corporations’ tax rates and other granted benefits, including tax arbitration for multinationals’ double tax relief. |
| Keywords: | federal taxes, OECD, tax arbitration, welfare program, tax revenue, corporate tax, income tax, Tax Cuts and Jobs Act, individual taxes, MAP arbitration, alternative sources of revenue, mutual agreement procedure, international taxation, Base Erosion Profit Shifting (BEPS), Action 14, Section 482, arm’s length |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:smo:cpaper:6ga&r=all |
| By: | Florian Scheuer; Joel Slemrod |
| Abstract: | The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International’s Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation. |
| Keywords: | perceived corruption, economic growth, panel data |
| JEL: | C23 H11 K40 O11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7817&r=all |
| By: | Benjamin Harbolt |
| Abstract: | As e-commerce has grown over the last few decades so has states' concern for its use for sales tax avoidance. Using a panel of Washington State tax jurisdictions from 2005 through 2015, I estimate the effect of a sales tax regime change on the elasticities of taxable sales. I find the regime change, targeted at reducing sales tax avoidance through remote purchases, had a differential impact that varied by tax jurisdiction. I find that in tax jurisdictions near the border of lower-sales-tax states (Oregon and Idaho) consumers became more responsive to the difference in sales tax rates across borders than their counterparts in the interior of the state. I interpret this as a substitution by consumers along the Oregon and Idaho border from e-commerce purchases to cross-border shopping in order to avoid sales taxes. |
| Keywords: | sales tax avoidance, destination-based taxation, cross-border shopping |
| JEL: | H26 H71 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7814&r=all |
| By: | Francis Bloch; Gabrielle Demange |
| Abstract: | This paper analyzes taxation of an Internet platform attracting users from different jurisdictions. When corporate income tax rates are different in the two jurisdictions, the platform distorts prices and outputs in order to shift profit to the low-tax country. We analyze the comparative statics effects of an increase in the tax rate of one country. When cross-effects are present in both countries, the platform has an incentive to increase the number of users in the high-tax country and decrease the number of users in the low-tax country. When externalities only flow from one market to another, an increase in the corporate tax rate results either in a decrease or an increase in the number of users in both countries depending on the direction of externalities. We compare the baseline regime of separate accounting (SA) with a regime of formula apportionment (FA), where the tax bill is apportioned in proportion to the number of users in the two countries. Under FA, an increase in the corporate tax rate increases the number of users in the low-tax country and decreases the number of users in the high-tax country. We use a numerical simulation to show that the high-tax country prefers SA to FA whereas the low-tax country prefers FA to SA. |
| Keywords: | digital platforms, multinational firms, corporate income taxation, formula apportionment, separate accounting |
| JEL: | H32 H25 L12 L14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7818&r=all |
| By: | K. Peren Arin; Emin Gahramanov; Tolga Omay; Mehmet A. Ulubasoglu |
| Abstract: | Previous literature provided mixed evidence regarding the effects of two major tax instruments, namely, labor income taxes and corporate taxes on economic growth. We hypothesize that the mixed evidence may be due to state-dependency of labor taxes. While corporate taxes retard economic growth by discouraging entrepreneurship in a linear fashion, the negative effect of labor taxes on growth may depend on the state of the economy, and may, thus, be non-linear. We provide a simple theoretical model which supports the latter hypothesis, and empirically test our predictions by using both statutory and average tax rates for a sample of 19 OECD countries over the 1981–2005 period. We also contribute to the literature by employing a newly developed Panel Smooth Transition (PSTR) model that controls for non-linearities in the tax structure-economic growth relationship. Our empirical findings suggest that while taxes on corporate income are distortionary for growth in both high- and low-growth regimes, taxes on labor income are harmful only during the high-growth regime. |
| Keywords: | Panel Smooth Transition, Fiscal Policy, Tax Policy, Growth |
| JEL: | O23 H30 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2019-68&r=all |
| By: | Lisandra Flach; Michael Irlacher; Florian Unger |
| Abstract: | This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties. We estimate the effects of corporate taxes on trade dynamics by exploiting policy reforms in 45 destination countries of exports during the period 2005-2012. Our results provide strong support for competitive effects of corporate taxation. |
| Keywords: | multi-product firms, corporate taxation, exporter dynamics, international trade |
| JEL: | H25 F12 L11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7809&r=all |
| By: | De Bruin, Kelly C; Yakut, Aykut Mert |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp619&r=all |
| By: | Nayudu, A. Sri Hari (National Institute of Public Finance and Policy) |
| Abstract: | The Federal structure of India divided taxation powers between Union government and state government on certain principles. But, due to the goods and service tax (GST) implementation, states have lost jurisdiction over many taxes, since many state taxes were subsumed into GST. The extent of revenue losses to states due to subsuming certain taxes is not clear. On the other hand, the revenue situation of the states has not improved sufficiently. Despite of states tax efforts, improvement in own tax revenues are marginal. Under this back ground, states need to focus on the other existing taxes to improve its own tax revenues. The major revenue yielding taxes to states in the post GST regime are excise tax and stamp duty and registration fees. This study attempts to measure tax capacity and tax effort of stamp duty and registration fee for 16 major Indian states from 2001 to 2014 using stochastic frontier analysis. It is found that Bihar is operating at high efficient levels with efficiency and Odisha and Jharkhand are operating with low efficiency. State government's needs to focus on the relevant stamp duty policy changes and potential determinants of the model, which will help them improve their efficiency. The gap between predicted tax revenue and frontier tax revenue is more the case of Gujrat, Rajasthan, Tamil Nadu, Punjab and West Bengal. |
| JEL: | H21 H25 H71 H73 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:19/278&r=all |
| By: | Levi Boxell; Zachary Steinert-Threlkeld |
| Abstract: | We examine the impact of a new tool for suppressing the expression of dissent---a daily tax on social media use. Using a synthetic control framework, we estimate that the tax reduced the number of georeferenced Twitter users in Uganda by 13 percent. The estimated treatment effects are larger for poorer and less frequent users. Despite the overall decline in Twitter use, tweets referencing collective action increased by 31 percent and observed protests increased by 47 percent. These results suggest that taxing social media use may not be an effective tool for reducing political dissent. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1909.04107&r=all |