nep-pub New Economics Papers
on Public Finance
Issue of 2021‒04‒12
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Can Covid-19 Induce Governments to Implement Tax Reforms in Developing Countries? By Sanjeev Gupta; João Tovar Jalles
  2. Policy Implications of Non-Linear Effects of Tax Changes on Output By Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
  3. Drivers of the Tax Effort: Evidence from a Large Panel By Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento
  4. Capital Tax Reforms With Policy Uncertainty By Arpad Abraham; Pavel Brendler; Eva Carceles
  5. Does digitalisation in public services reduce tax evasion? By Strango, Cristina
  6. Household bargaining, spouses'consumption patterns and the design of commodity taxes By Helmuth Cremer; Jean-Marie Lozachmeur; Kerstin Roeder
  7. Taxing Property in Developing Countries: Theory and Evidence from Mexico By Anne Brockmeyer; Alejandro Estefan; Karina Ramírez Arras; Juan Carlos Suárez Serrato
  8. Topics in Tax Policy: Evidence from an Internet Survey in Japan By Tomomi Miyazaki; Masayuki Tamaoka; Ayu Tomita; Keigo Kameda; Akihiro Kawase; Katsuyoshi Nakazawa; Hiroyuki Ono; Naoko Yokoyama
  9. The Impact of Taxes and Transfers on Poverty and Income Distribution in South Africa 2014/15 By Maya Goldman; Ingrid Woolard; Jon Jellema
  10. The Effects of Fiscal Policy on Poverty and Inequality in Tajikistan By Dalmacio F. Benicio; William Seitz; Jon Jellema; Maya Goldman

  1. By: Sanjeev Gupta; João Tovar Jalles
    Abstract: We estimate that the short to medium-term fiscal impact of previous pandemics has been significant in 170 countries (including low-income countries) during the 2000-2018 period. The impact has varied, with pandemics affecting government expenditures more than revenues in advanced economies, while the converse applies to developing countries. Using a subset of 45 developing countries for which tax reform data are available, we find that past pandemics have propelled countries to implement tax reforms, particularly in corporate income taxes, excises and property taxation. Pandemics do not drive revenue administration reforms.
    Keywords: fiscal policy; pandemics; local projection; impulse response functions; tax reforms; binary choice models
    JEL: C33 C36 D63 E32 E62 H20
    Date: 2021–03
  2. By: Samara R. Gunter; Daniel Riera-Crichton; Carlos A. Vegh; Guillermo Vuletin
    Abstract: In an earlier paper, titled "Non-linear effects of tax changes on output: The role of the initial level of taxation," we estimated tax multipliers using (i) a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014, and (ii) the so-called narrative approach developed by Romer and Romer (2010) to properly identify exogenous tax changes. The main finding is that, in line with existing theoretical distortionary and disincentive-based arguments, the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and more negative as the initial tax rate and the size of the change in the tax rate increase. This companion paper first shows that these findings have important policy implications, given that the initial level of taxes varies greatly across countries and thus so will the potential output effect of changing tax rates. The paper then turns to some specific policy applications. It focuses on the relevance of the arguments for revenue mobilization in countries with low levels of provision of public goods and social and infrastructure gaps, as well as in commodity-dependent countries. The paper then considers some practical implications for the standard debt sustainability analysis. Lastly, it evaluates the implications of the findings for the Laffer curve.
    JEL: E32 E62 H20
    Date: 2021–04
  3. By: Victor Barros; João Tovar Jalles; Joaquim Miranda Sarmento
    Abstract: This paper extends previous literature by assessing the drivers of tax effort in a large panel of 122 countries over the period 1980 to 2017 and refining the analysis to regions, periods, income group, and economic development level. Our focus is on five blocks of determinants, namely: economic, fiscal, openness, structural, and political. We find that tax effort is influenced by all blocks, although results differ per income group. Tax effort in advanced economies is driven by all blocks of drivers, except political variables, while openness, structural, and political blocks prevail in developing economies. There is no consistency regarding the determinants across the four regions (Latin America, Africa, Europe and Asia). We also find that during the first two decades under analysis, tax effort is mainly associated with both higher levels of countries’ tax revenues and the role of the agricultural sector in the economy, while from 1999 onwards the determinants are mainly driven by left-wing ruling governments and the economic and fiscal blocks of variables. Our results are robust for a battery of sensitivity and robustness tests. Taken all together, our findings suggest the existence of heterogeneous impacts, which implies that policies resulting in improvements in the level of tax effort can affect countries in different ways.
    Keywords: tax effort; fiscal policy; economic development
    JEL: H21 O10 O40
    Date: 2021–04
  4. By: Arpad Abraham; Pavel Brendler; Eva Carceles
    Abstract: One important feature of capital tax reforms is uncertainty regarding their duration. We use the Bush Tax cuts as the leading example to illustrate how uncertainty about reform duration may affect the economy’s path and erode political support for the reform. We model policy uncertainty by assuming that the reform may be either repealed or made permanent with some probability at a predetermined date. We show that policy uncertainty is a critical ingredient that can explain why the Bush tax cuts had no economically significant effect on investment, as confirmed empirically by Yagan (2015). While the permanent reform leads to positive aggregate welfare gains on impact, policy uncertainty may reverse this result. These observations hold both in a model with a representative firm and heterogeneous firms, but adding firm heterogeneity generates an interesting implication. In contrast to the permanent reform, policy uncertainty increases the TPF since it dampens investment by mature, less productive firms.
    Date: 2021
  5. By: Strango, Cristina
    Abstract: The aim of paper is to investigate the impact of digitalisation from public services on tax evasion. The analysis targets the European Union 27 (EU-27) member states over the period 2015-2019 by using panel estimators. The findings prove a nonlinear relationship between digitalisation from public services and tax evasion by U-shape. More precisely, the acceleration of digitalisation in public services reduces the level of tax evasion up to a certain point. Once the acceleration reaches that point, the level of tax invasion increases once again.
    Keywords: tax evasion, digitalisation, EU27, panel estimations
    JEL: C23 C89 H26
    Date: 2021–03–28
  6. By: Helmuth Cremer (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Marie Lozachmeur (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Kerstin Roeder (Universität Augsburg [Augsburg])
    Abstract: We study optimal commodity taxes under household bargaining. We focus on the taxation of ‘female' and ‘male' products. The expressions for the tax rates include Pigouvian and incentive terms. When the female spouse has the lower bargaining weight, the Pigouvian term calls for a subsidization of the ‘female good', and a taxation of the ‘male good'. The incentive term depends on the distribution of bargaining weights across couples. When the bargaining weight of the female spouse increases with wages, the female good will be consumed in larger proportion by more productive couples. In this case the Pigouvian term is mitigated.
    Keywords: Optimal commodity taxation,Household bargaining,Couples' taxation
    Date: 2021
  7. By: Anne Brockmeyer; Alejandro Estefan; Karina Ramírez Arras; Juan Carlos Suárez Serrato
    Abstract: Property taxes in developing countries are plagued by noncompliance and can exacerbate liquidity constraints. We characterize optimal enforcement and taxation policies as functions of revenue elasticities and measures of taxpayer hardship. We estimate these parameters using multiple sources of variation and administrative data from Mexico City. Both rate increases and enhanced enforcement raise revenue, but liquidity constraints also shape taxpayer behavior. Despite the presence of liquidity constraints, we find that raising tax rates increases welfare. In contrast, enforcement generates higher private costs than welfare benefits. On the margin, welfare-maximizing governments would prefer to increase tax rates rather than enhance enforcement.
    JEL: H21 H26 H71 O23
    Date: 2021–04
  8. By: Tomomi Miyazaki (Graduate School of Economics, Kobe University); Masayuki Tamaoka (Graduate School of Economics, Kobe University); Ayu Tomita (Graduate School of Economics, Kobe University); Keigo Kameda (School of Policy Studies, Kwansei Gakuin University); Akihiro Kawase (Faculty of Economics, Toyo University); Katsuyoshi Nakazawa (Faculty of Economics, Toyo University); Hiroyuki Ono (Faculty of Economics, Toyo University); Naoko Yokoyama (Faculty of Economics, Osaka Sangyo University)
    Abstract: This paper explains background information and basic descriptive statistics from the follow-up survey of our questionnaire summarized in Miyazaki et al. (2020). We confirm that taxpayers in Japan tend to abide by the rule, and their tax morale is as high as our first survey. However, most of the respondents feel that their perceived tax burden is especially high with respect to consumption tax. Furthermore, more than 40 % of the respondents feel that "ideal" consumption tax rate should be less than 10 % for all cases. Our results reinstate that whereas taxpayers of Japan have high tax morale and their rate of tax compliance is high, their resistance to consumption tax hike is strong.
    Date: 2021–03
  9. By: Maya Goldman; Ingrid Woolard; Jon Jellema
    Abstract: This paper applies the Commitment to Equity (CEQ) Assessment Framework to the 2014/15 Living Conditions Survey for South Africa to analyse the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. The tax and social spending system is progressive - the burden of taxes falls on the richest in South Africa and social spending results in sizable increases in the incomes of the poor. Reductions in poverty and inequality are the largest achieved in the emerging market countries that have so far been included in the CEQ. The analysis by gender shows that the fiscal system is partially responsive to the additional burden of childcare borne by women through social transfers such as the child support grant and public healthcare and education services, and partially responsive to inequality of access to labour opportunities through the progressive direct taxation system. However, these impressive results are partly due to high levels of pre-fiscal inequality in the country and due to valuing in-kind benefits from free government services in education and health at the average cost of provision – they do not take into account the significant variation in the quality of the services provided.
    Keywords: fiscal policy, fiscal incidence, social spending, inequality, poverty, taxes, transfers, education, health, housing, South Africa
    JEL: H22 I38 D31
    Date: 2021–01
  10. By: Dalmacio F. Benicio; William Seitz; Jon Jellema (CEQ Institute); Maya Goldman
    Abstract: The design of fiscal policies can either improve or worsen poverty and inequality. To quantify the effects of government taxation and social spending on measures of poverty and inequality in Tajikistan, we use the Commitment to Equity (CEQ) Assessment method with data from a survey called Listening to Tajikistan (2015) and fiscal data from administrative sources over the same period. We find that fiscal policy in Tajikistan contributes to an increase in the poverty rate (at the $US PPP 3.20 per person per day poverty line) by 5.12 percentage points. The results also show that the fiscal system achieves some modest redistribution despite a relatively small social expenditure budget. Although some transfers are well-targeted in Tajikistan, direct and indirect taxes fall heavily on poorer households and offset the poverty-reducing effect of public expenditures. The size of the main targeted social assistance program is insufficient to either remarkably reduce poverty or compensate for tax contributions among the poorest households. The findings suggest that social expenditures intended for the poor do not in practice reach their targets, and expenditures on universal services such as education and health care are spread evenly across the population. The strongest options for greater redistribution to support poor and vulnerable households include i) improved targeting of public expenditures, ii) greater progressivity by redesigning tax policy to collect a larger share of revenue from higher income people, and iii) larger transfer budgets for the best targeted expenditures such as Targeted Social Assistance (TSA).
    Keywords: Fiscal Incidence, Fiscal Policy and Inequality, Income Inequality, Poverty, Social Spending, Social Assistance, Taxation, Tajikistan
    JEL: H22 I38 D31
    Date: 2021–02

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