nep-pub New Economics Papers
on Public Finance
Issue of 2021‒04‒19
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Age-Targeted Income Taxation, Labor Supply, and Retirement By Johan Gustafsson
  2. Does stigma against tax avoidance improve social welfare? By Hamamura, Jumpei; Kurita, Kenichi
  3. Can Payroll Tax Cuts Help Firms during Recessions? By Youssef Benzarti; Jarkko Harju
  4. Taxation of fuel and vehicles when emissions are constrained By Geir H. M. Bjertnæs
  5. The Value Added Tax Simulation Model: VATSIM-DF (II) By Cristina Cirillo; Lucia Imperioli; Marco Manzo
  6. Women's Voice on Redistribution: From Gender Norms to Taxation By Monica Bozzano; Paola Profeta; Riccardo Puglisi; Simona Scabrosetti
  7. Assessment of the air pollution tax and emission concentration limits in the Czech Republic By Richard Juřík; Nils Axel Braathen

  1. By: Johan Gustafsson
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect is however an increase in life-cycle labor supply and consumption.
    Keywords: retirement age, life cycle, tax heterogeneity, savings consumption, leisure
    JEL: D15 J22 J26
    Date: 2021
  2. By: Hamamura, Jumpei; Kurita, Kenichi
    Abstract: Stigma can restrain tax avoidance. Tax avoidance behavior by multinational firms has become a public economics problem. Tax avoidance by firms may entail a kind of psychological cost, known as stigma. We analyze the impact of a multinational firm's profit shifting by multinational transfer pricing on social welfare using a simple model that assumes the existence of stigma. The results are as follows. First, stigma improves domestic social welfare more than the absence of stigma does. Second, stigma improves global social welfare more than the arm's length principle, which is the OECD consensus on transfer pricing of cross-border transactions. Third, the optimal degree of public exposure increases with the domestic tax rate and foreign market demand. Our study has the following implications. First, our results imply that stigma has implications for improving social welfare. Second, our results imply that regulators should eschew the arm's length principle and instead use stigma to improve the calibration of society as a whole by restricting the behavior of firms, which can cause problems in trade between nations. Third, in our study, because we find that choosing a positive degree of public exposure maximizes domestic social welfare, our results suggest that public exposure effectively stops the decline in social welfare caused by tax avoidance behavior in firms.
    Keywords: tax avoidance, stigma, transfer price, arm's length principle, multinational firm
    JEL: D43 H26 L12
    Date: 2021–04
  3. By: Youssef Benzarti; Jarkko Harju
    Abstract: This paper estimates the effect of payroll tax cuts on firm-level employment and balance-sheet outcomes during economic downturns. We use two regional payroll tax cuts in Finland as well as the onset of the Great Recession to estimate the effect of the recession on firms treated by the payroll tax cuts compared to a similar control group. When implemented, prior to the Great Recession, we estimate that the payroll tax cuts had limited effects on employment and balance-sheet outcomes of firms located in the treated regions. However, when the recession starts, some of its negative effects were substantially hampered by the previously enacted payroll tax cuts in treated firms. These employment effects are exacerbated for men and low-skilled employees. We also find that sales and profits in treated firms respond differently in treated firms during the recession. We provide some evidence showing that firms that are liquidity con-strained are the ones that exhibit the strongest response. This shows that payroll tax cuts can make firms more resilient during downturns, possibly by relaxing liquidity constraints.
    Keywords: labor costs, place-based policies, great recession, payroll taxes, employment, wages, firms, fiscal multipliers
    JEL: H20 H22 H23
    Date: 2021
  4. By: Geir H. M. Bjertnæs (Statistics Norway)
    Abstract: A tax on fuel combined with tax exemptions or subsidies for fuel-efficient vehicles is implemented in many countries to fulfill the Paris agreement and to curb mileage-related externalities from road traffic. The present study shows that a tax on fuel should be combined with heavier taxation of lowand zero emission vehicles to curb mileage-related externalities and to fulfill emission targets within the transport sector. The emission target is fulfilled by adjusting the CO2-tax component on fuel. The road user charge on fuel is designed to curb mileage-related externalities. The heavier tax on lowand zero emission vehicles prevent motorists from avoiding the road user charge on fuel by purchasing low- and zero emission vehicles.
    Keywords: Transportation; optimal taxation; environmental taxation; global warming
    JEL: H2 H21 H23 Q58 R48
    Date: 2021–03
  5. By: Cristina Cirillo (Ministry of Economy and Finance); Lucia Imperioli (Ministry of Economy and Finance); Marco Manzo (Ministry of Economy and Finance)
    Abstract: This paper describes the VATSIM-DF (II), a non-behavioural microsimulation model on the Value Added Tax (VAT), recently developed to support policy makers in designing VAT related policies in Italy. The most important goals of VATSIM-DF (II) are to estimate actual and expected VAT revenues, assess the VAT incidence on household disposable income, and simulate the distributional effects of changes in fiscal policies. Our results for 2019, at current VAT legislation, confirm the regressivity of VAT with respect to household income. Compared to existing models, the VATSIM-DF (II) has the great advantage of using Tax Register and National Accounts data, which make our model ideal for microsimulation purposes and perfectly consistent with the most updated macroeconomic data. To develop VATSIM-DF (II), we produce an original dataset by merging different data sources. Results for 2019, at current VAT legislation, show the VAT burden on Italian households and confirm the regressivity of VAT. Finally, we test the distributional effect of a revenue neutral reform, with two VAT rates, which applies the reduced VAT rate also to female and babies sanitary products.
    Keywords: redistributive effects, simulation, taxation, Value Added Tax
    JEL: H2 H22 H23
    Date: 2021–03
  6. By: Monica Bozzano; Paola Profeta; Riccardo Puglisi; Simona Scabrosetti
    Abstract: Gender norms, i.e. the role of men and women in the society, are a fundamental channel through which culture may influence preferences for redistribution and public policies. We consider both cross-country and individual level evidence on this mechanism. We find that in countries that are historically more gender-equal the tax system today is more redistributive. At the individual level, we find that in more gender equal countries gender differences in redistributive preferences are significantly larger. This effect is driven by women becoming systematically more favorable to redistribution, while there are no significant changes for men. Interestingly, there is no gender-based difference in preferences for redistribution among left-leaning citizens, while this difference is significant among moderates in the expected direction: ideologically moderate women are more favorable to redistribution than moderate men, and this effect is even stronger among right-leaning individuals.
    Keywords: gender inequality, comparative public finance, tax mix, institutions, historical origins
    JEL: H10 H20 N30 Z18
    Date: 2021
  7. By: Richard Juřík (Ministry of the Environment of the Czech Republic); Nils Axel Braathen (OECD)
    Abstract: This paper assesses the design of the air pollution tax in conjunction with a stringency analysis of the emission concentration limits in the Czech Republic. The analysis draws upon a detailed database containing environmental reporting by industrial stationary sources. The assessment of the emission concentration limits focuses on analysing the shift of the statutory limits between 2013 and 2017 and the corresponding real-life measured concentration on individual source basis. It provides an assessment of stringency of the air protection instrument and also of the vintage differentiation applied in the form of transitional schemes. The stringency analysis of the emission concentration limits stringency is related to the air pollution tax relief provision.
    Keywords: air pollution, air pollution tax, air protection, emission concentration limits, environmental policy, policy design
    JEL: H21 H23 K32 P48 Q50
    Date: 2021–04–14

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